Optimal rotation with differently-discounted benefit streams

Several reasons have been given to justify discount rates which decline through time. The expected and computed result is a sequence of progressively lengthening rotations. Reasons have also been given why different kinds of benefit (or cost) might be discounted at different rates: in particular, carbon fluxes. A similar lengthening sequence of rotations then invariably arises, whether the benefits are consumptive ones realised at the rotation end, or nonconsumptive ones whose annual value increases through the rotation. (Constant annual benefits have no effect on rotation, irrespective of discount rate.) The factors which justify different discount rates for different kinds of benefit do not lead to the dynamic inconsistency that arises when discount rates differ according to the length of the discounting period.

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Journal Article
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Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics
2012, Number 44
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 Record created 2017-04-01, last modified 2017-08-28

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