The choice of discount rate has a significant impact on net benefit estimates when costs today have benefits over long time horizons. Standard U.S. government practice for cost-benefit analysis is to bound such analysis using two alternative rates. These rates are meant to represent the rate of...

Government analysts have long used discount rates based on investment rates of return to approximate the effect of capital displacement. However, we show how this approach is not well grounded in economic theory and produces highly biased results, particularly in the context of decisions...