Goal
This project aims to understand how people think about future environmental consequences. Through a combination of lab and field studies, it examines the impact of the factors that influence the discount rate. Although its primary focus is descriptive (understanding how people actually think and decision), the results will have prescriptive, policy implications as well. In particular, this project explores the possibility of different discount rates for different goals: monetary, social, and environmental. Goal-specific discount rates are evaluated through the Krantz & Kunreuther (2007) framework.

Background
Typically, future outcomes are perceived to be less important than present outcomes, a process known as temporal discounting. Although much descriptive and normative work has been devoted to temporal discounting of economic outcomes, few studies have explored non-monetary outcomes. Typically, when policy decisions are made regarding environmental goods, such as forests or air quality, the environmental good is "priced out" to convert its value to a monetary sum at a certain point (or stream of points) in time, and the models developed for financial discounting are applied. However, this may not be appropriate, given the multiple differences between economic and environmental outcomes.

Unlike financial outcomes, which are consumed at a certain point (or points) in time, environmental outcomes often entail a semi-permanent change in the state of the world, which is not "consumed" in the traditional sense. Environmental outcomes such as these are often not fungible (meaning, tradable with money). Furthermore, environmental outcomes affect more people than monetary outcomes, over longer time horizons, and with greater uncertainty. They are difficult to quantify, and decision makers often have less domain familiarity than with financial decisions. As real-world environmental decisions invariably involve temporal components, all these differences need to be investigated.

Research Questions
Is there a baseline domain difference in discount rates for financial and monetary outcomes?

How are discount rates different when decision makers make choices on behalf of other people?

Are discount rates for environmental and social goals different from those for monetary goals?

Publications
Krantz, D.H. & Kunreuther, H. (2007). Goals and plans in protective decision-making. Judgment and Decision Making, 2, 137-168.

Related Material

»Society for Judgement and Decisionmaking Conference Presentation, November 2007: Discounting of Environmental Goods and Discounting in Social Contexts

Last Updated: February 20, 2008