Discount Rates

Eliezer Yudkowsky some years ago made this argument against temporal discounting:

I’ve never been a fan of the notion that we should (normatively) have a discount rate in our pure preferences – as opposed to a pseudo-discount rate arising from monetary inflation, or from opportunity costs of other investments, or from various probabilistic catastrophes that destroy resources or consumers.  The idea that it is literally, fundamentally 5% more important that a poverty-stricken family have clean water in 2008, than that a similar family have clean water in 2009, seems like pure discrimination to me – just as much as if you were to discriminate between blacks and whites.

Robin  Hanson disagreed, responding with this post:

But doesn’t discounting at market rates of return suggest we should do almost nothing to help far future folk, and isn’t that crazy?  No, it suggests:

  1. Usually the best way to help far future folk is to invest now to give them resources they can spend as they wish.
  2. Almost no one now in fact cares much about far future folk, or they would have bid up the price (i.e., market return) to much higher levels.

Very distant future times are ridiculously easy to help via investment.  A 2% annual return adds up to a googol (10^100) return over 12,000 years, even if there is only a 1/1000 chance they will exist or receive it.

So if you are not incredibly eager to invest this way to help them, how can you claim to care the tiniest bit about them?  How can you think anyone on Earth so cares?  And if no one cares the tiniest bit, how can you say it is “moral” to care about them, not just somewhat, but almost equally to people now?  Surely if you are representing a group, instead of spending your own wealth, you shouldn’t assume they care much.

Yudkowsky’s argument is idealistic, while Hanson is attempting to be realistic. I will look at this from a different point of view. Hanson is right, and Yudkowsky is wrong, for a still more idealistic reason than Yudkowsky’s reasons. In particular, a temporal discount rate is logically and mathematically necessary in order to have consistent preferences.

Suppose you have the chance to save 10 lives a year from now, or 2 years from now, or 3 years from now etc., such that your mutually exclusive options include the possibility of saving 10 lives x years from now for all x.

At first, it would seem to be consistent for you to say that all of these possibilities have equal value by some measure of utility.

The problem does not arise from this initial assignment, but it arises when we consider what happens when you act in this situation. Your revealed preferences in that situation will indicate that you prefer things nearer in time to things more distant, for the following reason.

It is impossible to choose a random integer without a bias towards low numbers, for the same reasons we argued here that it is impossible to assign probabilities to hypotheses without, in general, assigning simpler hypotheses higher probabilities. In a similar way, if “you will choose 2 years from now”, “you will choose 10 years from now,” “you will choose 100 years from now,” are all assigned probabilities, they cannot all be assigned equal probabilities, but you must be more likely to choose the options less distant in time, in general and overall. There will be some number n such that there is a 99.99% chance that you will choose some number of years less than n, and and a probability of 0.01% that you will choose n or more years, indicating that you have a very strong preference for saving lives sooner rather than later.

Someone might respond that this does not necessarily affect the specific value assignments, in the same way that in some particular case, we can consistently think that some particular complex hypothesis is more probable than some particular simple hypothesis. The problem with this is the hypotheses do not change their complexity, but time passes, making things distant in time become things nearer in time. Thus, for example, if Yudkowsky responds, “Fine. We assign equal value to saving lives for each year from 1 to 10^100, and smaller values to the times after that,” this will necessarily lead to dynamic inconsistency. The only way to avoid this inconsistency is to apply a discount rate to all periods of time, including ones in the near, medium, and long term future.


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