Economics notes: Discounting

BMJ 1999;319:914-915 ( 2 October )

Education and debate

Economics notes

Discounting

David J Torgerson, senior research fellow ^a, James Raftery, professor ^b.

^a Department of Health Studies and Centre for Health Economics, University of York, York YO1 5DD, ^b Health Economics Facility, University of Birmingham, Birmingham B15 2RT
The first 150 words of the full text of this article appear below.

Until recently it has been common practice in economic evaluations to "discount" both future costs and benefits, but recentlydiscounting benefits has become controversial. Discounting makescurrent costs and benefits worth more than those occurring inthe future because there is an opportunity cost to spending moneynow and there is desire to enjoy benefits now rather than in thefuture. The reason why current spending incurs an opportunitycost relative to delayed spending is that a monetary investmentyields a real rate of return and therefore there is a cost tospending money in thepresent.

For example, if £100 were invested with a nominal return of 10%, in one year's time it would be worth £110; if inflation was4% this would result in a real return of £6 on every £100 invested.If for some reason £100 of healthcare spending were delayed forone year then (assuming . . . [Full text of this article]

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Rapid Responses:

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Discounting misses the point: Chris Borthwick
bmj.com, 1 Oct 1999 [Full text]
Discounting health outcomes: David Wonderling
bmj.com, 6 Oct 1999 [Full text]