How do we value the future?

I am struck by the difficulty of getting people to value decisions whose worth only comes to fruition in the distant future. I am one of those people, as probably are all of us. In making business decisions, we argue that results must be seen in 12 to 18 months in order for our decisions to be believable. The best decisions are probably those whose impacts are seen immediately or at least in the current quarter. In many ways such  beliefs are solidly based. It is fair to assume that we have all wasted our time on decisions that have yielded no value, or at least much less value than the effort justified. A good friend of mine, H. Kessler, pointed out the following article that addresses some of the issues associated with a common economic approach to valuing the future as it relates to sustainability: http://www.thesolutionsjournal.com/node/1144.

Several things strike me as regards this approach called discounting the future. On the one hand, I think that there is a flaw in thinking about the future in this way, which is also hinted at in the above article. It is true that the net present value of a dollar 20 years from now is less than a dollar today. We use the concept of net present value to compare economic tradeoffs today with costs from the future. As the author points out however, we don’t really know the appropriate discount rate. For sustainability issues, we may be talking about less food or resources in the future based on present actions, which means we are talking about the loss of life in the future. How do we value that loss? The value to be well fed and the value to expect a reasonable life don’t change, even though the dollars assigned might.

On the other hand, I believe decision process theory suggests a different way of approaching the question of value, an approach more along the lines of the Art of War by Sun Tzu. I don’t have the details but my recollection is that the concepts arose out of observing local war lords fighting innumerable small battles. Battles were between villagers and bandits, with much harm and instability resulting for the common people. A mindset change came about by taking a step back and formulating general principles that were adopted by the very people doing the bulk of the fighting.  One such principle was that the best way to fight was not to enter into battle and thus not to fight at all. Such principles I would call components of a code of conduct, an ethical set of rules to be adopted by all, warriors and villagers alike.

I am becoming convinced that solutions for our modern problems that require valuing future costs must be based on a close observation of past behaviors of a similar nature. Like Tzu, we must then identify the new ethical rules that must become part of our Code of Conduct.  The ethical rules must be so well founded that the consequence of not following them should, like in the Art of War, be obvious and immediate. Such rules need to be self validating. This is essential since we all forget from time to time why we adopt even the most obvious ethical behaviors. We must be reminded to do no harm, and to not steal.

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