When I was in graduate school my natural resources profs pointed out
that with the interest rates prevailing in the mid-1960s, the
"discounted present value" of virtually anything was close to zero, so
long as the disaster and/or benefit in question were 40 years or more
in the future.
With the Federal Reserve pushing down short-term interest rates today,
and assuming a real interest rate of just 2 percent, that timeline has
no doubt been extended.
But the fact is that if we knew with almost 100% certainty that the
Battle of Armageddon and the end of the world would occur 600 years
from now * unless we took some moderately costly steps to prevent it
today, it would be "economically rational" not to take the steps
today. Because using the discounted present value method, the value
of doing something to save the world 600 years from now is just about
0 today.
I guess that's what the first post in this string is pointing out;
sorry to be just echoing what's already been said. But the point is
that discounted present value analysis is basically useless for
looking at very long-term costs and benefits.
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