Design Overview

1. Pricing Out Environmental Outcomes Yields Lower Discount RatesDavid J. Hardisty & Elke U. WeberColumbia University Results: Median Indif. Points Abstract Methods: Sample Questions Which option do you prefer? 263 US residents from a range of demographic backgrounds considered hypothetical monetary and environmental scenarios with immediate or delayed outcomes (6 months or 2 years). When discount rates for environmental scenarios were measured through willingness-to-accept ("pricing out"), discount rates for monetary and environmental outcomes were equivalent. However, using a within-domain measure of discounting yielded much higher discount rates for environmental scenarios. Introduction Discount rates for environmental outcomes (and other non-financial outcomes, such as health or lives) are frequently measured using one of two different methods. A within-domain measure might have respondents compare an immediate environmental benefit with a potentially greater environmental benefit at different points in the future, computing the discount rate from the difference in benefits per unit of delay (Baron, 2000). In contrast, a between-domain measure might ask participants how much an immediate environmental outcome is worth to them, compared with how much it would be worth to them if it were delayed different amounts, then computing the discount rate from the difference in dollar amounts per unit of delay (Hammitt & Harvey, 2000). Little is known about the whether or how the measurement method chosen affects the imputed discount rates. Results Discussion Between-Domain Measure of Discounting 1.2 Consistent with previous literature, larger magnitude outcomes (permanent environmental gains) were discounted less than smaller magnitude outcomes (temporary gains), and longer delays were discounted less than immediate delays (Frederick et al, 2002). Although environmental gains were discounted similarly to monetary gains when measured with a between-domain metric (ie, pricing them out), environmental gains were discounted much more when measured with a within-domain metric. Why? Perhaps when measured with dollars, participants are primed to think of alternate $ investments and market discount rates. Another possibility is that many participants are hesitant to trade off environmental values with money, asserting that an environmental benefit is equally valuable no matter when it is realized, thus translating to lower discount rates. 6 mo 1 2 yr 0.8 mean -ln(δ) 0.6 0.4 0.2 0 $ env$Tmp env$Perm Design Overview Within-Domain Measure of Discounting 263 US residents completed the study over the internet, making hypothetical choices between immediate and future monetary and environmental gains (within-subjects manipulation). The environmental scenarios described temporary or permanent improvements in air or water quality (between-subjects manipulation). Indifference points were imputed from a series of binary choices (“choice titration”) and fill-in-the-blank (“matching”) items. Discount factors (δ) were log and sign transformed to normalize outliers, especially some instances of negative discounting. The pattern of results was similar for air and water quality, so we have grouped them together here for our analyses. 3.5 6 mo 3 2 yr 2.5 2 References mean -ln(δ) 1.5 Frederick, S., Loewenstein, G., & O’Donoghue, T. (2002). Time Discounting and Time Preference: A Critical Review. Journal of Economic Literature, 40, 351-401 Baron, J. (2000). Can We Use Human Judgments to Determine the Discount Rate? Risk Analysis, 20, 861-868 Hammitt, J. K., & Harvey, C. M. (2000). Equity, Efficiency, Uncertainty, and the Mitigation of Global Climate Change. Risk Analysis, 20, 851-860 1 0.5 0 Contact: David Hardisty, http://davidhardisty.info, djh2117@columbia.edu $ envTmp