Discounting procedures in large engineering projects

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Citation (Scopus)

Abstract

In economic analysis of any engineering project discounting is a standard procedure used in cost-benefit analysis. With careful selection of the assumptions used in cost-benefit analysis it can be made to support, or oppose, almost anything. This is particularly so when the decision being studied involves some cost or benefit, for which there is no market price or which, because of an externality, is not fully reflected in the market price. Typical examples would be a project to build a hydroelectric dam in an area of outstanding natural beauty or a law to require factories to limit emissions of gases that may cause ill-health. Discounting tends to give less weight to future costs and benefits. The future environmental costs are either ignored or given less weight due to discounting in the economic analysis. This paper argues against using the practice of discounting and shows that both the time preference and the opportunity cost of capital arguments, used to justify discounting, are in conflict when we take the holistic approach to the environment.

Original languageEnglish
Title of host publicationSysCon 2012 - 2012 IEEE International Systems Conference, Proceedings
Pages677-682
Number of pages6
DOIs
Publication statusPublished - 2012
Event2012 6th IEEE International Systems Conference, SysCon 2012 - Vancouver, BC, Canada
Duration: Mar 19 2012Mar 22 2012

Other

Other2012 6th IEEE International Systems Conference, SysCon 2012
CountryCanada
CityVancouver, BC
Period3/19/123/22/12

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ASJC Scopus subject areas

  • Electrical and Electronic Engineering

Cite this

Malik, A. S. (2012). Discounting procedures in large engineering projects. In SysCon 2012 - 2012 IEEE International Systems Conference, Proceedings (pp. 677-682). [6189495] https://doi.org/10.1109/SysCon.2012.6189495