Why is the use of discount rate in cost-benefit analysis (CBA)?

The use of discount rate has become an integral part of CBA because a high discount rate tends to give a lower value to benefits which accrue after longer periods and result in giving more attention to the interests of future generations.

As such, since the discounting process calculates its results from the present generation’s perspective, one need to be concerned about inter-temporal equity issues, that is, the fairness of the decision to future generations.


Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on telegram