by Martin L. Weitzman
- It is widely recognized that the economics of distant-future events, like climate change, is critically dependent upon the choice of a discount rate. Unfortunately, it is unclear how to discount distant-future events when the future discount rate itself is unknown. In previous work, an approach called "gamma discounting" was proposed. This paper extends the previous gamma approach by using a Ramsey optimal growth model, combined with uncertainty about future productivity, in order to "risk adjust" all probabilities by marginal utility weights.
Weitzman, M.L. (2009). "Risk-Adjusted Gamma Discounting." Harvard University, mimeo, Dec 2009.
