Preferences in the future

Environmental economics has been much occupied with "the discount rate,'' which is the value of future costs and benefits relative to present costs or benefits. But at least as important is the question of what should be discounted, that is, what the value of those future environmental benefits is to future generations. This paper analyzes the role for future preferences and discusses the state of knowledge. I argue that the appropriate discount rate is the market one, and that the real problem is determining future willingness-to-pay. This approach makes clearer the connection between discounting and the valuation debate. This paper focuses on two features that have been prominent in that debate: existence value and reference dependence. I argue that there is a vital connection between the two constructs and that this link yields important implications for future willingness-to-pay.