new ideas. Thus, given that society’s well -being is a function of consumption, the social discount rate may reflect the weights that society puts on present and future total (market and non-market) consumption flows. Various economists have modelled social discount rates to suggest that policy makers should act as though they are maximizing a social welfare function that equals the present (discounted) value of current and future utilities from consumption. This should reflect society’s preferences for future versus present consumption. Using this method, a government might choose to pursue a particular project because it yielded a higher ’social’ return than the rate of social time preference. This perspective highlights two further refinements. First, utility functions may be non-separable, meaning that current well-being is influenced not only by present consumption but also by past consumption patterns. For example, an individual who has already enjoyed a high standard of living may derive less additional satisfaction from incremental consumption today compared to someone who has experienced persistent deprivation. This path dependence complicates welfare assessments because the marginal utility of consumption cannot be considered in isolation from historical trajectories. Second, a social planner should explicitly recognise the interdependence of market and non-market consumption. Many goods and services that contribute to social welfare, such as clean air, biodiversity, or cultural heritage, are not priced in conventional markets, yet they significantly shape human well-being. Treating them as separate from economic consumption underestimates their importance. Instead, aiming to integrate market and non-market values into a combined welfare framework ensures that long-term policies do not systematically undervalue environmental and social assets. Taken together, these refinements indicate that a purely financial conception of discounting, one focused narrowly on market-based consumption flows, is inadequate for capturing the full spectrum of factors that influence intergenerational welfare. A more comprehensive approach is needed, one that accounts for historical context, social and environmental externalities, and the cumulative nature of human well-being. Ethical and public sector models may offer alternatives to the intertemporal myopia than typifies conventional discount rates and capital allocation market-failures. Depending on the types of capital at play, this can take a Utilitarian approach and or a Rawlsian approach. Neumayer (2007) 99 argued that both Stern and his critics were too preoccupied with the discount rate and should, instead, have focused on the irreversible loss of natural capital.
Summary
Third, in response to the limitation of intertemporal myopia, we suggest a more equitable, intertemporal perspective that is possible by including the issue of non-static discount rates and the acknowledgment of various forms of capital contribution. By adjusting these variables, we can begin to account for future generations, leveraging ethical models to balance the interest of current and future generations, supporting long-term societal well-being. Table 3 sets of the limitations and solutions proposed above.
99 Neumayer, E., 2007. A missed opportunity: The Stern Review on climate change fails to tackle the issue of non- substitutable loss of natural capital. Global environmental change , 17 (3-4), pp.297-301.
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