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The Robin Hood Rules for Smart Giving$
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Michael Weinstein and Ralph Bradburd

Print publication date: 2013

Print ISBN-13: 9780231158367

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231158367.001.0001

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The Meaning of Present Discounted Values

The Meaning of Present Discounted Values

Chapter:
(p.53) 5 The Meaning of Present Discounted Values
Source:
The Robin Hood Rules for Smart Giving
Author(s):

Michael M. Weinstein

Ralph M. Bradburd

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231158367.003.0005

This chapter examines the notion of present discounted value (PDV). Funders prefer benefits that accrue immediately to identical benefits that accrue in the future. There are three rationales for the premise: impatience, aversion to risk, and compound interest. As funders quantify the impact of their interventions, whether by Relentless Monetization (RM) or some other framework, they can ignore with impunity uncertain benefits that might accrue generations into the future. In the real world, the computation of PDVs requires that we make some choices: the interest rate, the assumed inflation rate, and the pattern of the stream of benefits over time, including the length of time that the benefits will last. Properly discounting future benefits as part of RM is all in the interest of making better choices in allocating resources. It follows that a funder's choice of discount rate must be made with care and that a funder should use a consistent discount rate when assessing the benefits of the various interventions it could fund.

Keywords:   present discounted value, compound interest, Relentless Monetization, interest rate, inflation rate, funders, discount rate

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