However, the differences do not end there. For example, natural and social capital have varying levels of impact and duration. The use of natural capital combined with built capital in the form of renewable energy infrastructure can prevent irreversible climate related damages and provided high marginal utility for vulnerable nations. Social capital for example in education, can have a multiplicative effect that continues well beyond the investment time horizon. Early childhood intervention is presumed to endow the recipients with capabilities that will both raise their potential (human capital) and contribute to greater social cohesion (social capital) and wider increases in productivity. The eventual pay-off is lower future social costs as reduced unemployment and social exclusion decrease the likelihood of social unrest, which is costly. In combination, the different strands of public sector social investment raise the stock of productive workers (see Begg, 2017 38 ). This can be mapped to improved quality of life, increased lifetime earnings, GDP growth, and ultimately an economic output, although ethical questions around quantifying human life remain (discussed further below). The differences go on to include changing relative scarcities (Baumgärtner et al., 2015), risk, required investments, depreciation rates and so on. We can understand the differences between the two and acknowledge that they are fundamentally different, but this paper suggests that this monological approach to discounting is less accurate than pluralistic discounting.
Intertemporal Myopia
Our final limitation focuses on intertemporal myopia.
A central argument in this paper is the failure to recognise intergenerational equity, reflected through the choice of the discount rate and the temporal shift of value. The conventional approach means today’s valuation of investments often fails to align with the perspectives of future generations, particularly regarding who bears the costs of the climate crisis and the deficits in achieving the UN SDGs. Clearly, the voices of future generations cannot be heard or represented at a democratic level, however scientific forecasts (e.g. Kotz et al (2024) 39 ) and anecdotal evidence alone point towards a rapidly deteriorating situation. By fixing a constant discount rate, prevailing practice effectively institutionalises present bias, privileging near-term returns while systematically undervaluing benefits that accrue to future generations, a distortion that is particularly acute in climate and social domains, where damages disproportionately fall on poorer, future generations. We describe this limitation as a function of intertemporal myopia. Ethical and philosophical frameworks offer some insights in how to address this limitation. For example, the Rawlsian 40 approach is grounded in the principles of fairness and intergenerational equity. Central to this approach is the ’veil of ignorance’, which requires decision-makers to design policies without knowing their own position in society, ensuring impartiality and fairness. It emphasizes the ‘maximin principle’, advocating for policies that maximize the welfare of the least advantaged, whether within the current generation or across future generations. This stands to reason given the disproportionate exposure of developing nations and the Global South to climate change.
Alternatively, a Utilitarian approach 41 can be used which is a moral and decision-making model based on the principle of maximizing overall utility or happiness. It focuses on achieving the
38 Begg, I., 2017. Social investment and its discount rate. The Uses of Social Investment , 174 . 39 Kotz, Maximilian, Anders Levermann, and Leonie Wenz. "The economic commitment of climate change." Nature 628, no. 8008 (2024): 551-557. 40 Rawls, J., 1971. A Theory of Justice. Cambridge, MA: Harvard University Press. 41 Mill, J.S., 1863. Utilitarianism. London: Parker, Son, and Bourn. Bentham, J., 1789. An Introduction to the Principles of Morals and Legislation. Oxford: Clarendon Press
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