Discounting for Civilian and Military Projects

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Authors
  1. Sokri, A.
Corporate Authors
Defence Research and Development Canada, Centre for Operational Research and Analysis, Ottawa ON (CAN)
Abstract
The Social Discount Rate (SDR) is a crucial parameter in any economic evaluation of public projects. It is the rate at which a society is willing to convert future costs and benefits into present values. The selection of the appropriate SDR has always been a perplexing problem in Cost-Benefit Analysis. This paper develops an economic model to simultaneously derive and estimate real SDRs for civilian and military sectors. The setting is represented by a welfare function that has the Stone-Geary form and depends on consumption and military security. A Golden Rule, referred to as dg1, to find plausible values for SDRs is provided. Using the most recent data and commonly meaningful agreed-on assumptions, the real civilian and military SDRs are respectively estimated to be 2.8% and 1% for Canada.
Keywords
Social Discount Rate;Cost-Benefit Analysis;Stone-Geary Model;Military Projects
Report Number
DRDC-RDDC-2018-N005 — External Literature
Date of publication
01 Jan 2018
Number of Pages
9
Reprinted from
GAU Journal of Social and Applied Science, Vol 7, Issue 2, p 11 15
DSTKIM No
CA045663
CANDIS No
806098
Format(s):
Electronic Document(PDF)

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