PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28

DORFMAN

Professor KooPMANS has asked a very searching question dealing
 with a very central issue. I should like to try to respond to it
in two stages. First, it seems to be essential that there should be
some rate of discount to be used in comparing results that mature at
different times, If there is none, inconsistencies will certainly creep
into the governments’ investment program. Different and conflicting
 choices will be made in designing different projects and projects
mn different sectors of the economy. In some cases substantial
resources will be expended to secure early accrual of benefits, and
in others, the opposite choice will be made. The wastes resulting
from such discrepancies can be avoided only by applying a uniform
rate of time preference to all projects. I believe that Professor
Koopmans would subscribe to that, but then he asks where are the
necessary rates of time preference to come from. The second part
of my response deals with that issue,
In some project planning, in the United States, for example, an
explicitly formulated rate of time preference is incorporated. More
usually there is no explicit rate, but if one reviews the choices
made in the project design, often an implicit rate can be discovered.
The annals of project design and of legislative debate of projects
submitted to legislatures should, I am conjecturing, disclose what
these implicit rates of time discount are. I do not believe that there
is any economic market from whose behavior the social rates of
:ime preference can be ascertained. As a substitute for such a market,
 I suggest that we review from this point of view the behavior
of governments, and particularly of their legislative branches.

VIAHALANOBIS

I should agree with Professor Koopmans on technical points
which I may briefly mention; but I have got some points of a very
different nature. On p. 4, education has been given as a leading

31 Dorfman - pag. 28