Hyperbolic Discounting

Ecosystems provide humans with direct and indirect benefits. These benefits are provided as long-term services. The loss of ecosystems triggers a loss of these long-term benefits, which means that only considering the annual value is misleading. For this tool we consider a 25 year period to approximate the impact on benefits received by the next generation. 

Economists typically apply a social discount rate when estimating future benefits. This considers the fact that people have a strong preference for present consumption. The longer the benefit is placed in the future the less people value these benefis or costs. However, experiments have shown that the rate by which people discount future value drop, which means that people do not distinguish (much) between benefits in two years in the distant future. Therefore, the social discount rate decreases the further we step into the future. This type of scoial discounting is referred to as hyperbolic discounting.

For our calculation we assume the following to approximate hyperbolic discounting:
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