If global GDP grew by 3 percent during those two
centuries, the value of the world's output in 2200 will be $8
quadrillion ... But in present value terms, that stupendous sum would
be worth just $10 billion. In other words, it would not make sense ...
to spend any more than $10 billion ... today on a measure that would
prevent the loss of the planet's entire output 200 years from now."
Traditional cost-benefit analysis falters because it implicitly assumes
that we possess perfect knowledge regarding the world 200 years hence -
and, insanely, that we will survive to enjoy ad infinitum the interest
on capital we invest today. From our exalted and privileged position in
the present, the dismal science appears to suggest, we judge the future
distribution of income and wealth and the efficiency of various
opportunity-cost calculations. In the abovementioned example, we ask
ourselves whether we prefer to spend $10 billion now - due to our "pure
impatience" to consume - or to defer present expenditures so as to
consume more 200 years hence!
Yet, though their behavior indicates a denial of imminent death -
studies have demonstrated that people intuitively and unconsciously
apply cost-benefit analyses to decisions with long-term outcomes.
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