The Discount Rate of Well-Being
1. The Discount Rate of Future Well-Being: Acting to mitigate climate change clearly
means making sacrifices NOW in order to make people in the FUTURE better off. But,
how much should we sacrifice for future generations? Is their future happiness worth
just as much as our present happiness? Or less? Or maybe more?
Just as many people think that we should help our own GEOGRAPHICALLY before we
help others (i.e., we should give priority to impoverished U.S. citizens over impoverished
foreigners), many also think that we should help our own TEMPORALLY before we help
others (i.e., we should give priority to the needs of present people before we start
thinking about future people).
The fact of the matter is that we DO tend to “discount” future well-being/experiences to
some extent. For instance, if I offered you a $1000 gift certificate to your favorite store,
and asked if you wanted it now or in one year, almost everyone would say that they
would prefer to have it now. But, what if I offered MORE if you chose next year? How
much would it take to change your mind? $1001 a year from now? $1010? $1100?
Whatever your answer, this is your own personal “discount rate” of future well-being.
In this lecture, we will ask: What “discount rate” of future well-being should we use when
making decisions about climate change?
2. How Much is Future Happiness Worth?: When we assign a positive “discount rate”
to future well-being, we are saying that X amount of OUR well-being HERE AND NOW is
worth more than that same amount of FUTURE well-being for FUTURE PEOPLE. The
higher discount rate we assign to future well-being, the weaker our obligations to
consider the future when making present moral decisions. If the discount rate is high
enough, then disasters that will occur several decades from now should hardly concern
us in the present at all. But keep in mind that even a discount rate of 5% is “high”, as it
delivers that the value of someone’s well-being in 100 years is only worth a fraction of
1% of the well-being of a present person. Here is a chart depicting a 5% discount rate:
1
The “Market Value” of Well-Being: Most economists suggest that we let the market
decide how much the well-being of future people is worth. For instance, if an orange
costs $1.00, and apples cost $0.50, then an orange is worth twice as much as an apple.
In effect, we “vote” on how much something is worth every time we spend money, thus
indicating with our purchase that we are willing to pay that amount for that item.
If this line of reasoning is extended to well-being, then if we are willing to spend $100 to
prevent a present harm, but only $95 to prevent an equal harm next year, then the
discount rate of well-being is 5%.
Since we ARE willing to pay more to prevent present harms than future harms,
economists take this to indicate that there IS a positive discount rate of future wellbeing.
Objections: But, should questions about the value of well-being be decided in this way?
Broome offers some criticisms.
(1) Some Goods May Be “Incommensurable” With Money: This proposal assumes
that moral value can be assigned a dollar value. But, this entire approach may
be fundamentally flawed. For instance, many ethicists think that sums of
money are incomparable with, e.g., the aesthetic value of a pristine landscape,
or the preservation of a species, or the ability of a nation to live without the
threat of starvation, and so on.
(2) Diminishing Marginal Utility: As we have seen, a dollar is worth different
amounts for different people due to diminishing marginal utility. For instance,
$100 would bring a lot of well-being to an impoverished person, but would
hold almost zero value for a billionaire. For instance, an economist would
assign a town with 1 person who has $1 million and 99 people with $0 the
same value as a town with 100 persons who have $10,000 each. But, this
seems clearly mistaken.
In short, how much someone is willing to pay for something may not be a
clear indicator of how much they value it. For instance, a rich person might be
willing to spend $10 million on a private jet, but a poor person might not even
be willing to spend $5 on one (assuming they cannot immediately then sell it
for more).
(3) Future People Not Accounted For: We should keep in mind that the people
who will be most affected by climate change are FUTURE people, most of
whom have not even been born yet. As such, their “votes” are not even
2
accounted for by the present market. If they WERE accounted for, it is certain
that they would be voting for us to make huge sacrifices now for their sake.
[For that matter, not even many PRESENT people’s “votes” are accounted for,
since many global citizens are too poor to participate in this supposed
market. It seems that, if the value of lives is controlled or determined by the
market, then it is controlled or determined by the RICH, since they are the
ones spending most of the money, and therefore the ones with the largest
votes.]
(4) Value is Not Subjective: This proposal treats value as a subjective matter, as if
how much someone’s life or well-being is worth were a matter of taste. But,
how much someone’s life is worth is not a matter of taste. It is a moral matter,
and therefore an objective one.
Consider: If our preferences determined the value of a life, then someone’s life
would be determined to be worth very little merely in virtue of the fact that
no one was willing to spend very much to save them. By this reasoning,
apparently the lives of those in third world nations are not very valuable, since
the market has indicated that we’re not willing to spend very much to save
them (even though, as Singer noted, it would take very little to do so). But, it
does not seem that the value of a life should be determined in this way.
(5) Irrational Preferences: It is a known fact that people’s preferences regarding
the future are irrational. Simply put, they often act in a short-sighted way
where they will accept immediate pleasures over long-term ones, even
though doing so is often detrimental to their future well-being (e.g., consider
smokers, or people who do eat poorly, or do not exercise, or even criminals,
cheaters, and adulterers who choose immediate pleasures over later ones—
but then later regret their past decisions). While people DO seem to discount
future well-being, it is unclear that it is rational to do so.
For instance, if I offered you candy bar now, or 2 candy bars in a few weeks,
most people would choose the immediate gratification, even though they
would receive more overall pleasure from 2 candy bars later.
The primary reason for acting this way is that people are often (i) impatient,
(ii) ill-informed about the consequences of their actions, or else (iii) not
envisioning the future in a CLEAR or VIVID way. If they WERE patient, fully
informed, and able to perceive the future vividly, it is almost certain that
people would place more value on the future than they often do.
3
Conclusion: Economists tend to treat future well-being as a commodity—a non-moral
thing—rather than as something of moral concern. They even criticize those who
disagree as imposing some lofty ethical principles on everyone else. The idea seems to
be that future well-being is not a moral issue but an economic one, so no moral stance
need be taken regarding it.
But, as Broome points out, it is impossible NOT to take a moral stance on this issue. For,
the very claim that well-being is only of economic concern IS a moral stance, which must
be argued for philosophically. Economists who disagree, he says, are simply blinded to
the fact that they have made certain moral pre-suppositions in the very act of denying
that they have.
3. Well-Being is Not Temporally Partial; Not Temporally Relative: Broome
investigates the underlying assumption behind the proposal that there is a positive
discount rate to future well being: Temporal partiality. Broome writes,
Take a person who is now living a life of a particular quality, and compare her
with someone who will live a life of exactly the same quality a century from now.
… Should we attach less value to the future life than the present one, just because
it is in the future? If, somehow, there was a choice between these lives—either a
person could live now or a person could live a life of exactly the same quality a
century later—should we favor the existence of the present person rather than
the future one? I think most of us would naturally answer no to this question.
If you answered “no”, then you are temporally impartial. That is, you do not think that
one life has more value than another merely because one is in the present, while the
other is in the future. Temporal Partiality is the view that answers “yes” to this question:
 Temporal Partiality: The view that some valuable thing would have less value
if it occurred in the future than it would if it occurred in the present, merely
because the latter occurs at an earlier time. (opposing view: impartiality)
Note that this is slightly different than temporal relativity:
 Temporal Relativity: The view that how much value something has is
dependent upon the time at which it is evaluated. (opposing view: neutrality)
For instance, on this view, it could be the case that the value of some good
experience that you had last year could be deemed to have value X when evaluated
on Monday, but value Y when evaluated on Tuesday. (Contrast this with a temporally
NEUTRAL view of value, which says that, if your experience last year had value X,
then it ALWAYS has value X, no matter which time one is evaluating it from.)
4
Note: First note that all temporally impartial theories are also temporally neutral.
But, temporally partial views can be either relative or neutral. Let’s look at each:
 Partial/Neutral Scenario: Consider a temporally partial theory which discounts
future happiness and suffering at a rate of 1% per year. If this theory is ALSO
temporally neutral, then it means that this discount rate also extends into the
PAST. In that case, the suffering of one person in 500 BC would be FAR FAR worse
(disvaluable) than the suffering of EVERY SINGLE person alive today.
To put it more simply, consider the timeline below. On it, you will find 4 individuals.
Assume that all of them lived 75 very happy and fulfilling years of life:
1000 BC
0 AD
1000 AD
2000 AD
Albert
Bertha
Carrie
Donald
A partial/neutral view would deem that—even though the lives of these four individuals
are the same length, and all full of equal amounts of happiness and fulfillment, Albert’s
life is by far the most valuable, morally, and Donald’s is by far the least valuable; and this
is true MERELY in virtue of the fact that Albert’s life occurs earliest.
(1) Note that this result is temporally partial because it assigns different values to
different lives based on the time at which they occur, but it is also temporally neutral
because those value assignments do not change—rather, if Albert’s life is deemed to be
the most valuable, it will ALWAYS be deemed to be the most valuable, no matter WHAT
time the assessment is made. (2) Note that this is absurd.
So, we should reject all temporally partial/neutral theories of value.
That seems right. For instance, if future welfare is discounted, then eating a delicious
meal NOW is more valuable than eating a delicious meal NEXT YEAR, from the
perspective of now. But, surely we do not want to say next year, while eating a
delicious meal, “This meal is good, but it could never be as good as the one I had a year
ago, even though they taste exactly the same. The meal I had last year was better
BECAUSE IT OCCURRED A YEAR AGO.” That would be absurd. So, if value is temporally
partial, perhaps the values assigned to experiences CHANGE over time. Let’s look at that
option:
 Partial/Relative Scenario: You are temporally partial, so value has a discount
rate over time. You are also a temporal relativist, so value judgments can change
over time. Now imagine that you are trying to decide whether to take a vacation
next week to New Jersey or next year to Hawaii. Even though the trip to Hawaii
5
would be way more fun, from the perspective of the present, you ought to go to
New Jersey next week, since the future happiness of visiting Hawaii is so far off,
the discount rate makes it less valuable than the minimal happiness you will
experience by visiting New Jersey next week. So, you correctly judge that you
should go to New Jersey. You go there and have a mediocre time.
But, then, in one year, you consider your past decision. From the perspective of
ONE YEAR LATER, the happiness you would experience by going to Hawaii at that
time is WAY more valuable than your trip one year ago to New Jersey was. So,
you correctly judge that your past decision to go to NJ was the wrong decision,
and you ought to have waited and gone to Hawaii instead. Like this:
New Jersey earlier
As viewed from earlier:
As viewed from later:
Hawaii later
Correct
Incorrect
Incorrect
Correct
(1) Note first that this is a temporally partial view because it assigns different values to
different decisions based on the time at which they occur, but it is also temporally
relative because the values that get assigned to those decisions VARY depending on
the TIME at which they are evaluated. (2) Note that this is very implausible. Broome
notes that “A theory that says you can act rightly even though you know that you will
later correctly judge that you acted wrongly is not consistent with living a coherent life.”
So, we should reject all temporally partial/relative theories of value.
But, then, we have now rejected BOTH types of temporally partial views. That means that
value must be temporally IMPARTIAL.
Conclusion: If well-being is temporally impartial, then the implications are radical. What
this means is that future happiness and future suffering ARE NOT ANY LESS
IMPORTANT, MORALLY, than present happiness and suffering.
If that is true, then we have moral obligations to be making HUGE sacrifices for future
people, so that we can bring about a world worth living in for them. Broome concludes
that we should be making sacrifices for future people. Those who believe otherwise
are basing their belief on some sort of entitlement, which says that WE here in the
present matter MORE, morally, than future people. But, we should not feel entitled to
live at a much higher level of well-being than future people just because they are
located somewhere else in time. [Just as, perhaps, we should not feel “entitled” to our
riches, and keep them for ourselves rather than giving to starving children in need, just
because we are lucky enough to live in first-world nations while they are located
somewhere else in space.]
6
Simply put, one’s location in space and/or time is merely a matter of luck, and not
desert (we didn’t do anything to DESERVE to be in one particular place or time rather
than another, or to consume more resources just because we found ourselves in a place
or time where doing so could occur unchecked). Therefore, since our position in spacetime is not “special” when compared to any other, we have just as much of an obligation
to look out for the welfare of future people as we do to look out for present people.
7