ABSTRACT
Trade-offs Between Present and Future Why Discount Future Benefits? You can deposit money in a savings account and earn interest on your deposit. Given any such opportunity to earn a positive rate of return, the earlier money is available to invest, the larger are the returns in the future. People also feel impatience, fear uncertainty and inflation, and have finite lifetimes, all of which makes it preferable to receive money and other benefits sooner rather than later. Consider the option to receive $1,000 today or in 10 years. When would you rather have the money? The rational response is today, in part because:
Because people prefer to receive benefits soon, 80 to 90 percent of lottery winners decide to receive a lump-sum payment of around half of their earnings immediately rather than annual payments over several decades. If the carbon dioxide build-up in the oceans were curbed, annual revenues for the mollusk fishing industry alone would increase by between $75 million and $187 million over the coming decades, but the delay of benefits dampens interest in policies
that would reduce carbon emissions. To prefer benefits now and place a lower value on benefits received later is to “discount” future benefits.
