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world; in health care research to combat tropical diseases; and in edu-
cation to prepare a workforce to cope with the inevitable surprises that
will arise in the future. These are all productive investments whose
benefi ts accrue to future generations.
The second factor is compound interest, which so successfully eludes
our intuition. The power of compound growth turns tiny investment
acorns into giant fi nancial oaks. Here is one further example: At a 6
percent money interest rate, the $26 paid for Manhattan in 1626 would
yield $152 billion today. This is approximately equal to the land value of
the world's most valuable island.
As a fi nal point, note the difference between the very low discount
rate and the other discount rates in Table 7. Note that the lowest dis-
count rate in Table 7 calculates that the value of 50-year climate invest-
ments is more than four times larger than the value calculated at the
4 percent discount rate. The difference would be even greater with 100-
or 200-year payoff periods. This single point helps us understand the
logic behind the favorable cost-benefi t analysis of the Stern Review and
many other activist arguments. With low discount rates, early action is
so favorable primarily because future damages count for so much.
THE HEAVY BURDEN OF VERY LOW DISCOUNTING
How might we think about our obligations to our children, grand-
children, and so on further down the generational line? I will use the
example of parental concerns to illustrate the point. As parents, we natu-
rally feel intense concern for our children, worrying about their safety,
well-being, health, and happiness. We also care deeply for our grandchil-
dren, but our anxieties are mediated by the knowledge that their parents—
our children—are also caring for them. Similarly, our great-grandchildren
and great-great-grandchildren are more remote from our anxieties. In a
sense, they have an “anxiety discount” because we cannot judge the cir-
cumstances in which they will live, and because our children and grand-
children will be there to care for them after we are gone.
Just to make this point numerically, suppose our generational anx-
iety discount is one-half. So anxieties have a weight of 1 for our chil-
dren, 1 2 for our grandchildren, ( 1 2 ) 2 = 1 4 for the next generation, and
 
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