Tyler Cowen: belief

Transcript context

…A lot of economists and people from finance are used to applying discount rates, which causes them to think that, once you’re a hundred years out, consequences don’t seem to matter that much. I guess if they applied that backwards, it would mean that Tutankhamen thousands of years ago was perhaps, individually, more important than everyone who’s alive today. What do you have to say to people who are used to applying discount rates and use that kind of logic to discount the future? Discount rates are very useful for many purposes, especially if you’re looking at a small project done in a single firm and you’re trying to estimate how valuable to you is a cash flow, say, 20 or 30 years from now. But if you’re asking a question for all of society and if you apply a discount rate of 5 percent, 7 percent, whatever it’s going to be, you can end up with the results that say, “Well, a nickel today is worth more than saving the existence of the entire world hundreds of years from now.” That’s so counterintuitive. I think that, just as we do not discount the well-being of people who are distant from us in space per se, nor should we do so across time. You have this neat example of what if people were able to travel close to the speed of light and how this even sharpens the counterintuitiveness of using a discount rate. Do you want to describe that example?…

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