Discounting future health

In Norheim Emanuel Jamison Johansson Millum Otterson Ruger and Verguet (ed.), Global health priority-setting: Cost-effectiveness and beyond. Oxford University Press (forthcoming)
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Abstract

In carrying out cost-benefit or cost-effective analysis, a discount rate should be applied to some kinds of future benefits and costs. It is controversial, though, whether future health is in this class. I argue that one of the standard arguments for discounting (from diminishing marginal returns) is inapplicable to the case of health, while another (favouring a pure rate of time preference) is unsound in any case. However, there are two other reasons that might support a positive discount rate for future health: one relating to uncertainty, and the other relating to the instrumental benefits of improved health. While the latter considerations could be modelled via a discount rate, they could alternatively be modelled more explicitly, in other ways; I briefly discuss which modelling method is preferable. Finally, I argue against the common claims that failing to discount future health would lead to paradox, and/or to inconsistency with the way future cash flows are treated.

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Hilary Greaves
Oxford University

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