ABSTRACT
It is time for a serious reappraisal of the government’s policy on discounting costs and benefits in the evaluation of public policies, programs, and projects. OMB Circular A-94 specifying use of a real rate of 10% has been in force for more than a decade and while there have been some exceptions to the use of the 10% rate, a major reassessment of the correctness of that procedure is in order. New policy problems requiring a discount rate have emerged and different contexts may require different rates and discounting procedures. The major agencies concerned with the issue of the discount rate, namely the Office of Management and Budget, the Congressional Budget Office, and the General Accounting Office have turned their attention to this issue. There have also been changes in the world economy, in economic theory, and in empirical findings that bear on the analysis of government discount rate policy. We need to reassess the government’s discount rate policy in light of these new developments.
