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Minimum Wage Rises May Prompt Firms to Switch to Zero-Hours Jobs

February 21, 2019 in Economics

By Ryan Bourne

Ryan Bourne

The UK’s labour market performance continues to confound.
The employment rate is at its highest level since figures began in
1971. Unemployment is at its lowest rate
since early in 1975
. Yet a supposed bogeyman still stalks the
workforce statistics: the near million folk who identify as being
on zero-hours contracts (ZHCs) for their main job.

Since the steep increase in this prevalence from 2013, the
Labour party has made hay of the 901,000 people currently
contracted without guaranteed hours of work. It is evidence, they
say, of a jobs market characterised by low wages, few benefits,
little security and scant hope of building human capital. Despite
these workers representing just 2.8pc of overall employment, ZHCs
have become the totemic issue in the debate about labour market
regulation. In their 2017 manifesto, Labour promised to ban them
entirely.

The virulence of this criticism is wrong-headed. ZHCs can
clearly be mutually beneficial for employers and employees. But
Jeremy Corbyn and co never stop to ask why companies may have
expanded their use in recent years. Are bosses simply greedier than
half a decade ago? That seems unlikely. The wider acknowledgement
and awareness from workers of what ZHCs are may have contributed to
their burgeoning number in official statistics. But new evidence
suggests they may also be a consequence of a policy the Labour
party is rather fond of: raising minimum wage
rates
.

In industries dominated by low-paid workers and where labour
costs are a high proportion of total costs (such as retail and
health and social care), ZHCs allow companies to buffer hits from
rising statutory pay by reducing the number of staff on guaranteed
hours. In effect, the burden of risk and insecurity is outsourced
to employees, worsening their employment conditions, but better
allowing firms to manage higher costs.

A recent paper by economists from the LSE’s Centre for
Economic Performance suggests the introduction of the National
Living Wage in April 2016 had such an impact. The paper examined
closely the effects on the social care sector, which at 15pc had
the highest proportion of ZHC workers of any single industry. The
sector’s dependence on council funding also meant the
opportunity to pass on cost increases through to higher consumer
prices was very limited for these businesses.

Firms reacted to the minimum wage rise for over-25s by replacing
some fixed hours jobs with ZHCs. The overall proportion of those
employed in the social care sector on ZHCs increased by one
percentage point – raising it 24pc above the pre-National Living
Wage level.

According to their calculations, a domiciliary worker doing care
in individuals’ homes and earning the minimum wage …read more

Source: OP-EDS

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How NATO Pushed the U.S. Into the Libya Fiasco

February 21, 2019 in Economics

By Ted Galen Carpenter

Ted Galen Carpenter

A key worry among American critics of NATO is that expanding the
alliance into Eastern Europe may entangle the United States in
conflicts that have little or no relevance to our genuine security
needs.

But the 2011 NATO intervention in Libya is a reminder that even
Washington’s long-time allies like France and Britain can
create the same danger. In their memoirs, Secretary of State
Hillary Clinton and Secretary of Defense
Robert M. Gates reveal (at times perhaps
unintentionally) how those nations prodded the reluctant Obama
administration into taking such a fateful step in Libya. Clinton
herself was favorable to “humanitarian” military
missions, while Gates was openly hostile, yet their accounts track
closely, confirming how much of an impact allied lobbying had on
American decision-making.

As rebellions against authoritarian regimes erupted throughout
the Greater Middle East in late 2010 and early 2011 (the so-called
Arab Spring), the United States and its European allies pondered
how to respond. Libyan dictator Moammar Gaddafi was the target of
one uprising.

Obama officials reveal
how relentlessly our ‘allies’ lobbied for this ill-advised regime
change war.

At first, even Clinton seemed wary of U.S. involvement in any
military action to unseat Gaddafi. “When I met with French
President Nicolas Sarkozy, he urged the United States to support
international military intervention to stop Qaddafi’s advance
toward the rebel stronghold of Benghazi in eastern Libya,”
she recalled. “I was sympathetic but not convinced.”
Clinton noted, “The United States had spent the previous
decade bogged down in long and difficult wars in Iraq and
Afghanistan.”

In testimony before Congress, Clinton not only stressed the need
for “international authorization” before Washington
embarked on such a venture, she cited a key reason for her
wariness: “Too often, other countries were quick to demand
action but then looked to America to shoulder all the burdens and
take all the risks.” Her comment was an unsubtle swipe at
NATO’s European members.

Members of the Arab League, who had long loathed the volatile
Gaddafi, were also pressing for international intervention. The
League included such close U.S. security partners as Saudi Arabia,
Qatar, and the United Arab Emirates. But Clinton noted that at a
meeting of the G-8 economic powers, “the Europeans were even
more gung ho. I got an earful about military intervention from
Sarkozy.”

Similar pro-intervention lobbying from Britain impressed her
even more. “When I saw British Foreign Secretary William
Hague at dinner that night, he pressed the case for action.”
And if Hague thought war in Libya was necessary, “that
counted for a lot.” In Clinton’s opinion, Hague was a
prudent pragmatist, not an impulsive crusader or inclined to engage
in international grandstanding.

Gates also …read more

Source: OP-EDS

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Trump Treats Iraq like a Conquered Province

February 21, 2019 in Economics

By Doug Bandow

Doug Bandow

The driving force behind American foreign policy in recent years
has been hubris. The United States sees itself as the essential
unipower, endowed with the right, indeed the duty, to intervene
around the world. Any nation that gets in the way must be
crushed—but in a moral, compassionate way.

Fortunately, President Donald Trump rejects Full Neocon, the
foreign policy equivalent of the Full Monty. In his State of the
Union speech, he declared: “Great countries do not fight
endless wars.” He appears ready to pull U.S. troops out of
Syria and Afghanistan.

Unfortunately, hubris continues to dominate his
administration’s policy towards another nation: Iraq.

The Bush administration invaded Iraq based on a lie and a
fantasy. The former was Baghdad’s supposed possession of a
nuclear program; the latter was the expectation that adoring
acolytes would enthusiastically create America on the
Euphrates.

He recognizes the folly
of staying in Syria and Afghanistan forever. So why is Baghdad the
exception?

Thousands of Americans died, tens of thousands of U.S. personnel
were injured, hundreds of thousands of Iraqis perished, and
millions were displaced in a crescendo of sectarian violence. The
indigenous Christian community was destroyed.

Out of the war emerged al-Qaeda in Iraq, which eventually
morphed into the Islamic State. Only with substantial assistance
from Washington and other governments was the Iraqi military able
to liberate ISIS territory. Meanwhile, majority Shiite Iran gained
influence among its neighboring coreligionists. Indeed, a new
detailed U.S. Army study of the war concluded that “an
emboldened and expansionist Iran appears to be the only
victor.”

You’d think such a record would make Washington cautious
in dealing with Iraq in the future. The relationship there now is
both practical and transactional, with significant undercurrents of
hostility. Baghdad wants American support but not its
domination.

Yet Trump has treated Iraq as a conquered province.

Most Americans don’t remember when Washington was
fervently pro-Saddam Hussein. In 1980, he invaded Iran, after which
he enjoyed plentiful U.S. backing. That changed only in 1990 after
he seized Kuwait. In 2003, George W. Bush used the 9/11 attacks as
a pretext for invading Iraq.

The neoconservatives promised an easy victory—a
“cakewalk,” one said—followed by an even easier
occupation that would require few troops and cost few dollars.
Alas, these plans went dramatically awry. Nevertheless, as the
sectarian conflict finally wound down, American officials still
hoped to maintain a permanent military presence. What’s the
fun in invading and occupying another state if you can’t
leave some forces behind?

The Bush administration insisted on a Status of Forces Agreement
(SOFA) to protect American troops in Iraq. Prime Minister Nouri
al-Maliki refused. He explained: “We did not realize that the
U.S. demands would so deeply …read more

Source: OP-EDS

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War Weary: Why Washington Needs to Bring Its Troops Home

February 21, 2019 in Economics

By Doug Bandow

Doug Bandow

Great countries do not fight endless wars,” intoned
President Donald Trump in his State of the Union address, and he is
right. Certainly, nations that do fight them don’t stay
great, which should serve as a powerful warning for American
policymakers.

Alas, the Washington blob, the bipartisan foreign-policy elite
that has kept the United States at war for years, appears to have
learned nothing. Indeed, members of Congress didn’t greet the
president’s pronouncement with much enthusiasm. Legislators
had voted against his plan to withdraw U.S. forces from Syria and
Afghanistan. Members also had opposed his stated interest in doing
the same from South Korea. These are the same congressmen who
can’t be bothered to fulfill their constitutional
responsibility to approve America’s wars, yet they fear the
president might end one.

Indeed, some Washington policymakers reject any accountability.
Five years ago Samantha Power, one of the high tribunes of
humanitarian military intervention, reflected on what most
Americans recognize to be years of disastrous war-making: “I
think there is too much of, ‘Oh, look, this is what
intervention has wrought’ … one has to be careful about
overdrawing lessons.”

But they must be drawn. And the lessons from America’s
recent decades of intervention and war have not been pretty. For
instance, Ronald Reagan took the United States into Lebanon’s
bitter civil war, backing the “national” government,
which controlled little more than the capital of Beirut. Americans
became combatants and died for nothing.

The lessons from
America’s recent decades of intervention and war have not been
pretty.

Bin Laden and Al Qaeda had no interest in America’s
domestic institutions. They launched their terrorist operations in
response to U.S. intervention and war-making in the Middle East.
Bush administration Deputy Defense Secretary Paul Wolfowitz argued
that one benefit of the Iraq war was the removal of U.S.
“occupation” forces from Saudi Arabia, one of bin
Laden’s grievances.

American troops have been fighting in Afghanistan for more than
seventeen years, making it the longest war in U.S. history.
Washington almost immediately achieved its objectives of striking
Al Qaeda and ousting the Taliban; since then the war’s apparent
goal has been to impose a centralized liberal democracy in Kabul,
an effort neither worth war nor achievable at reasonable cost.
Today Americans are dying to kick the final withdrawal to the next
president.

The Iraq invasion was uniquely disastrous. The Bush
administration wrecked a nation, unleashed terror, triggered
sectarian war and religious cleansing, killed hundreds of thousands
of civilians, destroyed indigenous minority religious communities,
spawned Al Qaeda in Iraq—which morphed into the Islamic
State—and expanded Iran’s influence. Intervention in Libya
destabilized another country, spread weapons throughout the region,
and created a deadly vacuum for the Islamic …read more

Source: OP-EDS

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50 Year After Landmark Ruling, Public Schools Still Struggle Mightily with Speech

February 21, 2019 in Economics

By Neal McCluskey

Neal McCluskey

This coming Sunday will mark the 50th anniversary of the U.S.
Supreme Court ruling in
Tinker v. Des Moines
, which famously intoned that public
school students and teachers don’t “shed their constitutional
rights to freedom of speech or expression at the schoolhouse
gate.” Some may hear about the celebrated ruling and think it
ended any notion that public school officials can fetter
expression. But as the Cato Institute’s Public
Schooling Battle Map
illustrates, it did not. Student and
teacher expression is frequently curbed, and often for
understandable reasons.

Within the Tinker ruling, the irresolvable conflict in
public schooling is laid bare: government must not curb free
expression—see the
First Amendment
—but public schools, which are government
institutions, sometimes must fetter speech to effectively educate.
For instance, the Court wrote, “Clearly, the prohibition of
expression…at least without evidence that it is necessary to
avoid material and substantial interference with schoolwork or
discipline
[emphasis added], is not constitutionally
permissible.”

As the Battle Map, an interactive database of values- and
identity-based conflicts in public schools reveals, the need to
maintain order is just one concern among many that has spurred
public school officials to restrain speech. Administrators have
also curbed expression they feared would render a school
inhospitable
, even
threatening
, to students from minority groups. They have spiked
articles in student newspapers they thought were
unfair to their subjects
. They have punished speech by teachers
that appeared to be
political pronouncements
. And the list goes
on
.

Many—perhaps most—peoples’ sympathies likely lie
with students and teachers more than school officials. Hopefully
everyone’s first reaction is that government must not censor
speech. But these other concerns—disruption, marginalization,
captive political speech—are also utterly understandable
worries. For instance, as Justice Black wrote in his dissent, the
armbands that the Tinker students donned to protest the
war in Vietnam really did disrupt education:

[Students’] armbands caused comments, warnings by other
students, the poking of fun at them, and a warning by an older
football player that other nonprotesting students had better let
them alone. There is also evidence that a teacher of mathematics
had his lesson period practically “wrecked,” chiefly by disputes
with Mary Beth Tinker, who wore her armband for her
“demonstration.” Even a casual reading of the record shows that
this armband did divert students’ minds from their regular lessons,
and that talk, comments, etc., made John Tinker “self-conscious” in
attending school with his armband…the record overwhelmingly shows
that the armbands did exactly what the elected school officials and
principals foresaw they would, that is, took the students’ minds
off their classwork and diverted them to …read more

Source: OP-EDS

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The US Started This Tit-for-tat

February 20, 2019 in Economics

By John Glaser

John Glaser

Russian President Vladimir Putin has issued a clear warning to
the United States: If Washington deploys new intermediate-range
missiles in Europe, Moscow will, too.

The context behind this threat is President Donald Trump’s
withdrawal from the Intermediate-Range
Nuclear Forces Treaty
. Negotiated in 1987 by President Ronald
Reagan and Soviet leader Mikhail Gorbachev, the INF was a fairly
successful arms-control agreement in which each party agreed to
eliminate a whole class of missiles.

In recent years, both sides accused each other of failing to
fully uphold the agreement. Instead of pursuing diplomacy to
resolve the dispute,
Trump ordered a unilateral withdrawal
, accompanied by a promise
to start deploying the prohibited weapons.

Putin’s threat might seem like cause for alarm, but Americans
should keep two things in mind.

First, hard-line policies against Russia increase the likelihood
that Russia will respond in kind. From Moscow’s perspective, this
is a reaction to an onslaught of provocations from Washington. For
all the allegations of Trump’s weakness on Russia, the
administration’s official
strategy documents
single out Russia as a principal threat to
U.S. security.

Washington tends to
inflate the threat from Moscow, while simultaneously ignoring U.S.
policies that exacerbate tensions.

In addition to withdrawing from the INF, Washington has imposed
harsh economic sanctions on Moscow as punishment for meddling in
Ukraine. Other U.S. policies contribute to Russian feelings of
insecurity. Trump has
increased troop deployments
in Europe and is considering
opening a
new military base
in Poland.

Second, Putin’s threat is just not all that threatening. For
starters, the threat was conditional: He vowed that Russia will
not be
the first
to deploy new intermediate-range missiles, but it
will do so if the United States does first. He also expressed a
willingness to return to the negotiating table, insisting that “we
don’t want confrontation.”

More to the point, Russian military power hardly presents a
direct threat to America. Its gross domestic product is about $1.6
trillion, less
than a 10th of ours
, and its annual military spending is a
mere
$66.3 billion, compared with the more than

$700 billion
that we spend. Russia has nukes but possesses
limited power-projection capabilities and few allies that can aid
its out-of-area ambitions.

Russia certainly acts aggressively in its near abroad, but
Europe can easily deter it. Europe vastly outspends Russia on
defense, at
almost $285 billion
per year.

Washington tends to inflate the threat from Moscow, while
simultaneously ignoring U.S. policies that exacerbate tensions. A
new arms race in Europe was a predictable consequence of Trump’s
withdrawal from the INF. Luckily, there’s still time for peaceful
diplomacy to mitigate these risks. Whether the political will
exists …read more

Source: OP-EDS

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It's Time to Lift the Jones Act Embargo

February 20, 2019 in Economics

By Colin Grabow

Colin Grabow

Americans would probably be surprised to learn that, at least in
the energy sector, the island of Puerto Rico is currently under a
de facto embargo imposed by Congress. Incredibly, Puerto Rico finds
it impossible to import U.S. liquefied natural gas — not
despite being part of the United States, but because of it.

Earlier this month, senior Democrats and Republicans sent a
letter to the Trump administration demanding that this proverbial
embargo be kept in place. If that sounds unbelievable, you’re
probably not familiar with an obscure shipping law called the Jones
Act.

Passed in 1920, the Jones Act mandates that ships transporting
goods between two points in the United States must be U.S.-built,
U.S.-owned, U.S.-crewed and U.S.-flagged. Of the 478 ships in the world capable of transporting
liquefied natural gas, however, none meet these requirements.

Democrats and Republicans
are aligned on a law that denies Puerto Rico’s access to U.S.
energy supplies and condemns them to purchasing more expensive LNG
from elsewhere.

That’s a problem for Puerto Rico, which relies on LNG for
34 percent of its electricity generation and would
like to use more to replace some of the oil and coal that produce
64 percent of its electricity. But with no ships to transport it,
cheap U.S.-produced LNG has effectively been placed off limits.

And so, even while neighboring countries such as Barbados and the Dominican Republic import
U.S.-produced LNG, the economically struggling U.S. territory must
make do with more-expensive natural gas imported from abroad. Much
of the LNG that Puerto Rico uses comes from Trinidad and Tobago,
and according to a senior Puerto Rican government official, some of
it even comes from Russia.

Absent government action, this will not change anytime soon,
with almost zero prospect of a Jones Act-qualified LNG carrier
coming into existence. According to a 2015
U.S. Government Accountability Office report
, if a Jones
Act-compliant LNG carrier were to be built, it would likely cost up
to $475 million more than one built in South Korea.

Of course, no one knows exactly what the price differential
would be, since an LNG carrier hasn’t been built in this country
since 1980. As the GAO points out, it’s possible American shipyards
no longer possess the know-how to build such a ship, and South
Korean workers may need to be brought over to ensure the work was
done correctly.

Faced with such eye-popping prices and the lack of skilled U.S.
labor to build such vessels, U.S. energy exporters instead content
themselves with exporting LNG all over the world aboard
foreign-flagged ships. Everywhere, of course, …read more

Source: OP-EDS

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The Federal Reserve Could Once Push Back Against Big Spending Projects like the Green New Deal. Not Anymore.

February 20, 2019 in Economics

By George Selgin

George Selgin

Of many bold ideas pitched in Rep. Alexandria
Ocasio-Cortez’s proposed “Green New Deal,” the
boldest may be her plan for paying its multitrillion-dollar price
tag.

We can do it, she said in a blog post that has since been removed from her website, “in
the same ways that we paid for the 2008 bank bailout and the
extended quantitative easing programs, the same ways we paid for
World War II and many other wars.” In other words, we can
have the Federal Reserve pay for it.

Wouldn’t having the Fed pick up the tabs for
multitrillion-dollar projects cause inflation? Not long ago, it
would have. But during the subprime crisis, the Fed took steps that
severed the once relatively tight link between the amount of
government debt it took on and the tendency of prices to increase.
As a result, it’s now more tempting than ever for politicians
to expect the Fed to serve not just as the banking system’s
lender of last resort, but as the government’s financier of
first resort.

It’s now more tempting
than ever for politicians to expect the Fed to serve not just as
the banking system’s lender of last resort, but as the government’s
financier of first resort.

The Fed used to have a good excuse for not financing big
projects

Before the crisis, the Fed kept a lid on inflation by limiting
the supply of bank reserves, meaning the actual cash banks keep in
their tills, vaults and cash machines, together with deposit
credits they can draw on at their district Federal Reserve
Banks.

Banks need reserves to meet minimum legal requirements and to
settle accounts with one another at the end of each business day.
Generally, the more deposits and loans banks have to manage, the
more reserves they need. So long as they also keep no more reserves
on hand than they need, as is the case when reserves don’t
pay interest, the Fed can control inflation by making reserves more
or less plentiful. To combat deflation before the crisis, the Fed
created fresh reserves by buying government securities in the open
market. The sellers of those securities then deposited the proceeds
with their banks, adding to their reserves. To combat inflation, it
unloaded securities from its portfolio, taking back an equal sum of
reserves.

Under this traditional setup, if the Fed bought too many
securities, inflation would break loose. Consequently, whenever
Congress, or some president, pressured Fed officials for funding,
they had a ready answer: They could only do so much without
violating the Fed’s mandate.

Sometimes the excuse didn’t work

During both world wars, and again …read more

Source: OP-EDS

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Congress Is Complicit in Trump’s Power Grab

February 20, 2019 in Economics

By Michael D. Tanner

Michael D. Tanner

Some 20 years ago, Paul Begala, then an adviser to President
Bill Clinton, expressed his marvel at the ability of the president
to act unilaterally. “Stroke of the pen. Law of the land.
Kinda cool.”

And, of course, we all remember President Obama’s
assertion that he could bypass Congress as long as he had “a
pen and a phone.” Obama used that pen and phone not only to
implement DACA but to rewrite parts of the Affordable Care Act, to
circumvent the constitutional requirement that Congress approve
treaties, and to target US citizens with drone strikes. In fact,
DACA may turn out to be the most defensible of Obama’s
presidential power grabs.

For decades, Congress has
been abdicating its role in our constitutional structure, ceding
more and more power to a monarchical presidency.

In between, President George W. Bush declared unilateral
presidential authority to “nullify statutes and court
judgments” by refusing to enforce them, acting on the basis
of his independent legal judgment. Perhaps most notoriously, when
Congress passed an amendment to an emergency defense-appropriations
bill prohibiting torture during the interrogation of suspected
terrorists, President Bush issued a signed statement asserting that
he was not bound by it. And while the War on Terror was the biggest
impetus for Bush’s accretion of presidential power, he also
asserted the unilateral power to act on issues ranging from
Medicare to whistleblower protections to affirmative action.

Now, we have President Trump claiming the authority to
reallocate funds that Congress had (a) specifically appropriated
for other purposes, and (b) specifically refused to appropriate for
the uses the president wants.

The legal arguments around Trump’s declaration are
unclear. The president’s actions certainly appear to
contravene Article I, Section 9 of the Constitution, which says,
“No Money shall be drawn from the Treasury, but in
Consequence of Appropriations made by Law …” On the other
hand, the National Emergencies Act does give the president a great
deal of unilateral discretion. Other presidents have used it at
least 59 times to trample on congressional power (though most often
for imposing sanctions on foreign companies or individuals, or
wartime military projects).

Trump’s use of the statute might be more egregious than
most, but it’s neither completely unprecedented nor without
foundation. Congress may actually have voluntarily surrendered its
authority. And therein lies the bigger problem. For decades,
Congress has been abdicating its role in our constitutional
structure, ceding more and more power to a monarchical presidency.
The Founding Fathers, justifiably wary of a king, intended the
legislative branch to be preeminent. As Article I says, “All
legislative powers herein granted shall be vested in a Congress of
the United States.”

The job of …read more

Source: OP-EDS

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Want a More Future-Focused Government? Climate Action Is Just the Start

February 19, 2019 in Economics

By Ryan Bourne

Ryan Bourne

The reaction was predictable.

Last week’s Climate Strike by schoolchildren was met with
an inane debate about whether or not the pupils were right to
“play truant”.

This dialogue of the deaf was a missed opportunity. Politicians
should take seriously the protesters’ demand that they
“recognise that young people have the biggest stake in our
future”.

How we weigh policies which differentially impact today’s
adults and future generations has been a recurring undercurrent of
the last decade of British politics — including on deficit
reduction and Brexit. It’s time we asked whether we get the
balance right.

The children who went on
strike last week were right to argue that future generations get a
raw deal in policymaking. But this is a structural flaw of
government action that extends far beyond carbon
emissions.

Government policies shape the use of vast economic resources.
Underpinning all decisions are judgements about the relative
importance of the present against the future.

State action to curb carbon emissions, for example, requires
avoiding cheaper fuels today for investment in technologies with
future payoffs.

End-of-life healthcare, in contrast, means expending resources
today that society could otherwise deploy into research and
development spending or tax cuts to induce innovation and higher
living standards in future.

Climate policy is all about balancing the interests of current
and future populations.

Comparing different policies over time requires governments to
assume a “social discount rate” — a rate of
interest that means that future costs and benefits can all be
examined at their present value. The higher the discount rate is,
the less we are willing to give things up today for benefits in the
future.

But it is not obvious at all what that social discount rate on
government projects should be.

People usually have a clear preference for the present over the
future, meaning that the discount rate would be positive. We could
invest money that we do not spend on reducing carbon emissions,
after all, and it will return more over time.

This, and the fact that unforeseen events may wipe out the earth
at any moment, leads many to argue for policies to be
present-biased.

But this can lead to difficult moral territory. As George Mason
University’s Tyler Cowen has outlined, a positive discount
rate of two per cent implies that one life today is worth seven in
100 years; a five per cent rate means that a life today is worth
132 after a century.

Moreover, with issues with potentially big externalities, such
as climate change, one could argue that discounting downplays the
very real impacts that today’s decisions will have on distant
generations. Cowen himself argues then that the correct social
discount rate is near …read more

Source: OP-EDS