Ethical interest rate
Moralists claim that ethical standards are decreasing. Might this be caused by a fall in the relevant discount rate?
(a) Show why, using a model of self-enforcement based on quasi-rents.
(b) Is this model correct for analyzing this problem?
a) If qr are the per-period quasi-rents used to enforce a certain agreement and r is the discount rate, performance is driven by the present value of quasi-rents, qr/r, which increases when r falls. This means that a fall in the discount rate should be associated to better performance.
b) One may claim that ethical behavior and ethical standards are unrelated to these economic considerations. However, some ethical structures have an intertemporal structure. For instance, in the common idea of sin there is a tradeoff between current pleasure and future punishment, the same as in virtue, there is a tradeoff between current effort and future reward.
By the way, what is the relevant discount rate for after-death periods? Why people have been willing to sacrifice current consumption in order to provide for after death religious services?
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