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Cass R. Sunstein, On Not Revisiting Official Discount Rates: Institutional Inertia and the Social Cost of Carbon, 104 Am. Econ. Rev. 547 (2014).


Abstract: Within the federal government, official decisions are a product of both substantive judgments and institutional constraints. With respect to discounting, current practice is governed by OMB Circular A-4 and the 2010 and 2013 technical support documents of the Interagency Working Group on the Social Cost of Carbon. Reconsideration of existing judgments must be subjected to a demanding process of internal review (and potentially to external review as well). Institutional constraints, including the need to obtain consensus, can impose obstacles to efforts to rethink existing practices, especially in an area like discounting, which is at once technical and highly controversial. Both decisions costs and error costs must be considered.