Are Discount Rates Too High? Population Health and Intergenerational Equity

Increasing attention is being paid to policy decisions in which shorter-term benefits may be eclipsed by longer-term harms, such as environmental damage. Health policy decisions have largely been spared this scrutiny, even though they too may contribute to longer-term harms. Any healthy population or society must sustain itself through reproduction, and therefore, transgenerational outcomes should be of intrinsic importance from a societal perspective. Yet, the discount rates typically employed in cost-effectiveness analyses have the effect of minimizing the importance of transgenerational health outcomes. We argue that, because cost-effectiveness analysis is based on foundational axioms of decision theory, it should value transgenerational outcomes consistently with those axioms, which require discount rates substantially lower than 3%. We discuss why such lower rates may not violate the Cretin-Keeler paradox.