Social Discount Rate

The Social Discount Rate (SDR) is a method used to evaluate the importance of future benefits and costs in decision-making. It reflects how much we value present resources compared to future ones. For instance, if a project costs $1 million now but saves $1.5 million in ten years, the SDR helps determine if that future gain is worth the current expense. A higher SDR means future benefits are valued less, while a lower SDR suggests we regard future benefits more. This concept helps guide investments in public projects by balancing immediate costs with long-term outcomes.