Discuss arguments for and against setting high discount rates.
What will be an ideal response?
Setting discount rates can be difficult and controversial. Proponents cite several reasons for using high (5-10%) discount rates. One argument is that inflation can reduce the value of future earnings on a resource. Another is that innovation or changes in consumer preferences can make a product or resource obsolete. For example, the plastic composites made to look like redwood may reduce the future use and market value of this timber. In addition, owners of resources such as forests argue that without a high discount rate, they can make more money by investing their capital in some other venture. Critics point out that high discount rates encourage rapid exploitation of resources for immediate payoffs, thus making long-term sustainable use of most renewable natural resources virtually impossible. These critics believe that a 0% or even a negative discount rate should be used to protect unique, scarce, and irreplaceable resources such as old-growth forests. They also point out that moderate discount rates of 1-3% would make it profitable to use nonrenewable and renewable resources more slowly and in more sustainable ways.
You might also like to view...
What steps would you take in order to identify a mineral by its physical properties?
What will be an ideal response?
For a continental area to experience a Cfb climate, it must be located:
A) at low latitude. B) at high latitude. C) on the east side of a continent. D) on a windward coast.
Normal kidney function involves which of the following?
A) filtration in which small molecules are lost but large molecules are retained B) reabsorption of some small molecules from the urine C) both a and b D) neither a nor b
In which portion of a nephron are glucose and amino acids reabsorbed?
A) the distal tubule B) Henle's loop C) the glomerulus D) the proximal tubule