african evidence on the relation of poverty, time preference and the environment

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Ecological Economics 38 (2001) 317 – 326 COMMENTARY African evidence on the relation of poverty, time preference and the environment William G. Moseley * Department of Geography, Dais Hall, Rm. 118, Northern Illinois Uniersity, DeKalb, IL 60115 -2854, USA Received 15 November 2000; received in revised form 12 March 2001; accepted 13 March 2001 Abstract It is typically argued in the economics literature that the poor operate with a higher rate of time preference than their wealthier counterparts. The poor, it is suggested, have a higher rate of time preference because they are more concerned about present survival than they are about saving for the future. Such thinking is also central to the economic growth for environmental conservation and the poverty induced environmental degradation arguments. According to these assertions, wealth allows people to consider the future and invest in environmental conservation; and poverty leaves people with no alternative but to exploit the environment so that they may feed their families today. Evidence from the food security and famine early warning fields suggests that households in many African contexts behave quite to the contrary. During periods of food shortage, poor households will often undertake extreme measures in the present, including depriving the family of needed calories, in order to preserve productive capital for the future, such as a plough, oxen or seed stock. This evidence suggests that poor African households may, in fact, have very low rates of time preference. This calls into question our general assumptions about discount rates for developing countries, for which rates of time preference are a theoretical determinant. © 2001 Elsevier Science B.V. All rights reserved. Keywords: Discount rate; Time preference; Poverty; Famine behavior; Africa www.elsevier.com/locate/ecolecon 1. Introduction This article examines some of the common as- sumptions concerning the relationship between wealth and the rate of time preference, a theoreti- cal determinant of the discount rate, and com- pares these assumptions with the behavior of poor and hungry households in Africa as described in the food security 1 and famine early warning 2 liter- 1 One of the most widely referenced definitions of food security is a World Bank (1986) definition, which defined food security as ‘access to enough food at all times for an active, healthy life’. 2 Famine early warning refers to the study of how to predict famines early enough so that they may be prevented or mitigated. * Tel.: +1-815-7530631; fax: +1-815-7536872. E-mail address: [email protected] (W.G. Moseley). 0921-8009/01/$ - see front matter © 2001 Elsevier Science B.V. All rights reserved. PII:S0921-8009(01)00184-7

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Ecological Economics 38 (2001) 317–326

COMMENTARY

African evidence on the relation of poverty, time preferenceand the environment

William G. Moseley *Department of Geography, Da�is Hall, Rm. 118, Northern Illinois Uni�ersity, DeKalb, IL 60115-2854, USA

Received 15 November 2000; received in revised form 12 March 2001; accepted 13 March 2001

Abstract

It is typically argued in the economics literature that the poor operate with a higher rate of time preference thantheir wealthier counterparts. The poor, it is suggested, have a higher rate of time preference because they are moreconcerned about present survival than they are about saving for the future. Such thinking is also central to theeconomic growth for environmental conservation and the poverty induced environmental degradation arguments.According to these assertions, wealth allows people to consider the future and invest in environmental conservation;and poverty leaves people with no alternative but to exploit the environment so that they may feed their familiestoday. Evidence from the food security and famine early warning fields suggests that households in many Africancontexts behave quite to the contrary. During periods of food shortage, poor households will often undertake extrememeasures in the present, including depriving the family of needed calories, in order to preserve productive capital forthe future, such as a plough, oxen or seed stock. This evidence suggests that poor African households may, in fact,have very low rates of time preference. This calls into question our general assumptions about discount rates fordeveloping countries, for which rates of time preference are a theoretical determinant. © 2001 Elsevier Science B.V.All rights reserved.

Keywords: Discount rate; Time preference; Poverty; Famine behavior; Africa

www.elsevier.com/locate/ecolecon

1. Introduction

This article examines some of the common as-sumptions concerning the relationship betweenwealth and the rate of time preference, a theoreti-cal determinant of the discount rate, and com-pares these assumptions with the behavior of poor

and hungry households in Africa as described inthe food security1 and famine early warning2 liter-

1 One of the most widely referenced definitions of foodsecurity is a World Bank (1986) definition, which defined foodsecurity as ‘access to enough food at all times for an active,healthy life’.

2 Famine early warning refers to the study of how to predictfamines early enough so that they may be prevented ormitigated.

* Tel.: +1-815-7530631; fax: +1-815-7536872.E-mail address: [email protected] (W.G. Moseley).

0921-8009/01/$ - see front matter © 2001 Elsevier Science B.V. All rights reserved.

PII: S 0921 -8009 (01 )00184 -7

W.G. Moseley / Ecological Economics 38 (2001) 317–326318

ature. The author addresses two research ques-tions related to the examination of time prefer-ence rates: (1) How accurate are conventionalassumptions regarding rates of time preference forpoorer households in relation to the findings ofscholars in the food security and famine earlywarning fields? (2) How does one explain thedivergence between time preference theory andthe behavior of food insecure households inAfrica? This paper is a conceptual exploration(rather than empirically-based analysis) and isbased on a broad synthesis of findings in the fieldsof economics, food security, cultural studies andenvironmentally sustainable development.

2. The rate of time preference for the poor andhungry

It is typically argued that poorer people, partic-ularly those facing food shortages, have a higherrate of time preference than their wealthier coun-terparts because they are more concerned abouttheir present needs than they are about saving forthe future (Murphree, 1993; Bardhan, 1996; Lum-ley, 1997). It is similarly assumed that wealthierpeople have lower personal rates of time prefer-ence as, with their most pressing needs satisfied inthe present, they are able to consider and save forthe future.

It is generally accepted that an individual’sdiscount rate is influenced by a number ofpersonal factors such as wealth and incomeprofile… Wealthier, healthier, younger and bet-ter educated individuals are likely to have lowerdiscount rates than their poorer, older, sickerand less well educated counterparts…if you arerich, you can afford to defer consumption ofgoods because you are already likely to havemore of everything you want or need (Lumley,1997, pp. 76–77).

Within the context of natural resource use, it issimilarly assumed that the poor have very highrates of time preference in that they tend toover-exploit local resources so that they may feed

their families in the short term. Dasgupta (1997)notes that ‘[a] recent intellectual tradition arguesthat the reason the poor today degrade theirenvironmental resource base is that their povertyforces them to discount future incomes at unusu-ally high rates’ (p.13). For example, Murphreeasserts that the behavior of lower income house-holds in Zimbabwe towards the environment isindicative of a high rate of time preference.

A culture of poverty [exists] in which the indi-vidual is preoccupied with survival in thepresent and where any effective concern for thefuture is missing. A culture of poverty is one inwhich the future is discounted at a very highrate. This is a recipe for accelerated degradationbecause poverty is both the cause and effect ofenvironmental degradation (Murphree, 1993).

The notion that poorer households have ahigher rate of time preference than their wealthierneighbors is also indirectly discussed in thebroader literature on sustainable development.While not explicitly stated, assumptions regardingthe time preferences of the wealthy and poorunderpin certain interpretations of this concept.

One of the most widely accepted definitions ofsustainable development, albeit extremely general,is that formulated by the Brundtland Commis-sion. Brundtland (WCED, 1987) defined this con-cept as ‘development that meets the needs of thepresent without compromising the ability of fu-ture generations to meet their own needs’. Inlinking development and the environment,Brundtland allowed some scholars to assert thateconomic growth is a prerequisite for sustainablenatural resource use (see Mellor, 1988; Becker-man, 1992; Pearce and Atkinson, 1993; Barrett,1996). In its 1992 development report (devoted tothe environment and development), World Bank(1992) stated that ‘[e]conomic development andsound environmental management are comple-mentary aspects of the same agenda…incomegrowth will provide the resources for improvedenvironmental management’ (p. 25). The implica-tion is that wealthy individuals are more likely to

W.G. Moseley / Ecological Economics 38 (2001) 317–326 319

think of the future and invest in natural resourcemanagement (i.e. the wealthy have lower rates oftime preference). However, the notion that eco-nomic growth is a prerequisite for sustainablenatural resource use is hotly contested in theliterature. Many argue that economic growth isantithetical to environmental conservation (seeDaly, 1991; Goodland, 1991; Hueting, 1995).

The corollary of the economic growth for envi-ronmental conservation argument is the povertyinduced environmental degradation thesis. Thisthesis was also articulated by the BrundtlandCommission in 1987 (WCED, 1987) and subse-quently re-articulated at other international fora(UNCED, 1993) and by multilateral institutions(World Bank, 1996). According to this argument,poorer households are more likely to degrade theenvironment because of shorter time horizons anda lack of resources to invest in environmentalconservation. The poor and hungry have shortertime horizons (i.e. higher rates of time preference)as they are preoccupied with surviving in thepresent. As such, these households will have nochoice but to abuse the immediate environment inorder to meet their most basic needs.

Those who are poor and hungry will oftendestroy their immediate environment in orderto survive. They will cut down forests; theirlivestock will overgraze grasslands; they willoveruse marginal lands; and in growing num-bers they will crowd into congested cities. Thecumulative effect of these changes is so farreaching as to make poverty itself a majorglobal scourge (WCED, 1987, p. 28).

Brundtland went on to state that poverty leadsto a cycle of environmental abuse. ‘Many parts ofthe world are caught in a vicious downward spi-ral: poor people are forced to overuse environ-mental resources to survive from day to day’(WCED, 1987, p. 27). In addition to their over-whelming attention to short-term consumptionneeds, it is suggested that the poor, almost bydefinition, have no resources or willingness toinvest in the future. ‘Poverty is also a factor inaccelerating environmental degradation, since the

poor, with shorter time horizons...are unable andoften unwilling to invest in natural resource man-agement...’ (World Bank, 1996, p. 13). As in thecase of growth-led conservation, there is also aliterature questioning the poverty induced envi-ronmental degradation thesis (see, Broad, 1994;Martinez-Alier, 1995; Reardon and Vosti, 1995;Duraiappah, 1998).

3. Time preference and African coping strategies

This section examines the validity of conven-tional assumptions regarding rates of time prefer-ence for poorer households in light of the findingsof scholars in the food security and famine earlywarning field. In particular, focus will be on theuse of coping strategies by food insecure house-holds in Africa during food shortages as one wayof interpreting the time preference rates of thepoor. When faced with the prospect of foodshortfalls, the poorest of the poor should morethan any other group be preoccupied with meet-ing current consumption needs if the prevailingassumptions are accurate. The short and long-term costs of under-nutrition are obviously quitehigh, ranging from less energy for labor, to in-creased disease susceptibility, to stunting amongchildren, and even death (Chen, 1990; Payne andLipton, 1990). Behavior not aimed at reducingthese very serious and immediate costs to thehouseholds would contradict standard assump-tions regarding high rates of time preference forthe poor and hungry.

In the rural milieu of many African countries,households often resort to coping strategies dur-ing periods of food shortage. Davies (1996) hasdefined coping strategies as ‘the tertiary activitiespursued by people to survive when habitual pri-mary and secondary activities cannot guarantee alivelihood’. In other words, coping strategies areshort-term measures undertaken to obtain foodwhen standard sources of income or food fallshort of normal levels. Households, for example,might collect wild foods or seek additional em-loyment in the event of a harvest failure. Ruralhouseholds also often have certain assets, such asa few animals or a plow, that could potentially beliquidated in order to purchase food during a

W.G. Moseley / Ecological Economics 38 (2001) 317–326320

pcrisis. Food security experts traditionally as-sumed that coping strategies were used to main-tain current levels of food consumption during acrisis (Corbett, 1988; De Waal, 1989). This as-sumption is consistent with those just discussed inthe previous section, namely, that households areso focused on survival in the present that they willsacrifice longer-term opportunities.

Despite the conventional wisdom regarding thetime horizons of the poor, it has been observedthat rural African households are often extremelyreluctant to sell productive assets during a foodcrisis. In fact, long before the family oxen or plowis sold, poor families very often cut back on foodconsumption for extended periods of time in or-der to avoid decapitalization (Maxwell andFrankenberger, 1992). Households also cut backon consumption, or switch to less desirable wildfood sources, in order to preserve a significantportion of grain reserves as seed stock for the nextyear’s planting. This type of behavior suggeststhat extremely poor and hungry households donot have high rates of time preference, but arewilling to make serious sacrifices in the present inorder to enhance the chances of future productiv-ity. This type of future-oriented behavior in theface of food insecurity in the present has not beenlimited to a few isolated cases, but is a commonlyobserved phenomenon. Such behavior has beennoted and studied in a variety of African contexts,including Sudan (Cutler, 1986; De Waal, 1989),Nigeria (Watts, 1983), Ghana (Devereux,1993a,b), Mali (Davies, 1996) and Ethiopia (Tur-ton, 1977; Rahmato, 1987). For example, Davies(1996) reported poorer households in Mali reduc-ing consumption to one meal per day during thehungry season3 in order to preserve productivecapital, such as plow oxen. In Darfur, Sudan, itwas found that ‘[f]amine victims had exchangeentitlement to ‘esh [food] which they did not fullyutilize…people simply went very hungry…Theircentral aim during the famine was to preserve thebase of their livelihood, so that they could returnto a normal or acceptable way of life after the

famine’ (De Waal, 1989). In reviewing famine casestudies from Northern Nigeria, Sudan andEthiopia, Corbett (1988) concluded that in timesof food insecurity households, at least initially,are ‘primarily concerned with maintaining the fu-ture income-generating capacity of the householdintact, rather than simply maintaining current lev-els of food consumption’.

The phenomenon of skipping meals in order topreserve productive assets is now understoodwidely enough that some famine early warningsystems explicitly take this into account in theirmonitoring methodologies (Buchanan-Smith etal., 1991; Eele, 1994; SCF, 1997). For example, inSave the Children’s RiskMap food security analy-sis computer program, the default assumption inanalyzing coping strategies is that households willseek to preserve productive capital (SCF, 1997;Hutchinson, 1998; Seaman, 2000). This under-standing is of practical importance to those moni-toring food security as the sale of productiveassets may imply that the population has alreadyendured an extended period of below averagecalorific intake. Taking action before this stageincreases the speed of recovery after a drought.However, it is noted that coping strategies varytremendously from location to location, and it isdangerous to interpret coping strategies in a stan-dard fashion across cultural and ecological con-texts (Corbett, 1988; Frankenberger, 1992;Davies, 1996).

Fig. 1 depicts the possible difference betweenthe conventional time preference–wealth relation-ship (curve B) and the more nuanced relationshipsuggested by the behavior of poor, food insecurehouseholds in Africa (curve A). In periods of foodinsecurity and poverty, the rate of time preferencebecomes quite low as households switch into a‘conservation mode’ by minimizing current con-sumption in order to preserve longer-term liveli-hood viability. This low time preference isreflected by curve A in the section marked povertyon the horizontal axis. As noted by a number ofauthors (Corbett, 1988; De Waal, 1989), however,households cannot continue to minimize currentconsumption indefinitely. Eventually, after a pro-tracted food shortage (which may have been pre-ceded by several years of drought), households are

3 The hungry season refers to a period before the newharvest when grain stocks from the previous harvest and cashresources are severely limited.

W.G. Moseley / Ecological Economics 38 (2001) 317–326 321

Fig. 1. The relationship between time preference and wealth

forced to sell off productive assets in order toavoid starvation. This change in direction fromlow to high time preference is indicated by point 1on curve A. This phase of higher time preference,which may increase asymptotically until death, isrepresented by the destitution portion of curve A.Finally, the time preference for moderate towealthy groups rises and then levels off at somepoint where greater wealth does not further in-crease the rate of time preference. Curve B repre-sents the conventional wealth– time preferencerelationship, where time preference declines aswealth increases. The figure is based on a generictime horizon. It is admitted that the time-prefer-ence/wealth relationship may be different for amedium-term time horizon (e.g. 5 years) than fora longer-term time horizon (e.g. 40 years).

4. The divergence between theory and thebehavior of the poor

So, how does one explain the divergence be-tween time preference theory and the behavior offood insecure households in Africa? I will addressthis question by examining the universality of the

logic and assumptions that undergird time prefer-ence theory. More specifically, I will analyze threesets of assumptions, (1) the universality of basicneeds; (2) the notion that future generations willbe better off than those in the present (also re-ferred to as growth-induced time preference); and(3) the underlying level of impatience concept. Iwill suggest that these theoretical justifications areculturally laden assumptions that may make sensein a Western context, but are more problematic inmany rural African settings, particularly in thepoorest and most food insecure contexts.4 Thenotion that general economic models tend to un-derstate cultural variation, or are inapplicable inmany traditional settings, has been made by anumber of other authors (e.g. Guyer and Peters,1987; Porter, 1987; Logan, 1995).

While not expressly articulated in the econom-ics literature, I would assert that the relationshipbetween wealth and the time preference rate ispredicated on a series of assumptions related to

4 The reader should understand that I am making verybroad generalizations. Africa is culturally diverse, and concep-tions of time, economic growth and self-interest will varygreatly between contexts.

W.G. Moseley / Ecological Economics 38 (2001) 317–326322

basic needs (e.g. food, water and shelter) and thelimited ability to defer fulfillment of such needs. Ilay out this series of assumptions here and in theset of equations in Box 1, followed by a prob-lematization of this logic if all of the assumptionsdo not hold. First, if basic needs are universal,then the basic needs requirement (Qbasic) of therich and poor are equivalent. Second, if Qbasic isfixed, then it must make up a greater proportionsof total consumption (Qbasic+Qnon-basic) for thepoor than the rich, who consume more overallthan the poor. Third, time preference rates forbasic needs (TPRbasic) are higher than time prefer-ence rates for non-basic needs (TPRnon-basic) as itis difficult to defer fulfillment of the former.Fourth, average time preference (TPRavg) is aweighted average of TPRbasic and TPRnon-basic, anddepends on the mix of basic and non-basic con-sumption within a household. Fifth, TPRavg ishigher for poor than rich households becauseTPRbasic is higher than TPRnon-basic, and basicneeds account for a greater proportion of thetotal consumption of the poor than the rich.

Box 1: Assumptions linking basic needs and ahigh rate of time preference for the poor

The behavior of food insecure households inAfrica suggests that the poor and hungry aremuch more willing than previously had beenthought to sacrifice basic needs in the present forwell-being in the future. While I do not questionthe right of every person to an internationallyacknowledged minimum threshold for food andshelter, it may be that time preference rates forbasic needs are not as systematically high as orig-inally thought, or that basic needs are not univer-sal. In other words, conceptions of basic needsmay vary between cultures and even between

wealth groups. For example, the ability to defer(i.e. hunger thresholds) and the definition of basicneeds for an American and an Ethiopian, or for awealthy and poor Ethiopian, may vary consider-ably. Pacey and Payne (1985) suggest that allestimates of nutritional requirements have to betreated as value judgements. If the definition andthe ability to defer basic needs varies by class orculture, then the basic needs of the rich do notnecessarily equal those of the poor (Rich Qbasic�Poor Qbasic) and the time preference rate for basicneeds is not necessarily higher than that for non-basic needs (TPRbasic�TPRnon-basic). The over-turning of these assumptions calls into questionthe series of logical steps that led to the conclu-sion that the time preference rates of the poor arehigher than those of the rich.

Many traditional arguments for a positive rateof time preference are based on the belief thatfuture generations will be better off than those inthe present (also referred to as growth-inducedtime preference) (Pearce and Turner, 1990; Field,1997). According to this argument, current gener-ations may reasonably (and ethically) weight aunit of consumption in the present more heavilythan the same unit in the future where it is

assumed to be a proportionately smaller piece ofan ever expanding pie. For example, Pearce andTurner (1990) suggest that ‘as future societies arelikely to be richer we should attach less weight totheir gains, i.e. we should discount their futuregains.’ In discussing economic growth and theenvironment in the Third World context, Becker-man (1992) asserts that future generations ‘will befar wealthier on any reasonable extrapolation oftrends.’

I would suggest that expectations for consistenteconomic growth are not warranted in a number

Poor Qbasic=RichQbasic (1)

[Poor Qbasic/(Poor Qbasic+Poor Qnon-basic)]� [Rich Qbasic/(Rich Qbasic+Rich Qnon-basic)] (2)

TPRbasic�TPRnon-basic (3)

TPRavg= [TPRbasic* (Qbasic/Qbasic+Qnon-basic)]+ [TPRnon-basic* (Qnon-basic/Qbasic+Qnon-basic)] (4)

Poor TPRavg�Rich TPRavg (5)

W.G. Moseley / Ecological Economics 38 (2001) 317–326 323

Fig. 2. Variable grain production in 4 Sahelian countries. Source: United Nations, 1997. Statistical Yearbook ; and EconomistIntelligence Unit, 1999a,b. Country Profiles for Mali, Niger, Burkina Faso and Chad ; Economist Intelligence Unit, 2000. Countryprofile for Cote d’lvoire, Mali.

of African contexts. Many of the poorest andmost food insecure areas in Africa are in marginalagricultural areas with highly variable rainfall. Insuch areas (and even nationally in some cases),agricultural production varies significantly de-pending on the level of rainfall. Fig. 2 depictsgrain production for four Sahelian countries(Mali, Niger, Burkina Faso and Chad) that fre-quently face food shortage and are often men-tioned as among the poorest in the world (WorldBank, 2000). Variation in grain production wouldbe even more extreme for specific localities than atthe national level (given that deficit areas areoften balanced out by production in other regionsof a country in any given year). This variability inagricultural production means that the rationalrural dweller must always be prepared for a dryyear with significant production shortfalls. Assuch, geography influences time preference to theextent that poor households living in marginal

areas will almost always be saving (and postpon-ing current consumption) in order to have abuffer against future crop and pasture failure incontrast to wealthier households in developedcountries that may, arguably, expect the future tobe better than the present.

The underlying level of impatience assumption(also known as ‘pure time preference’ or ‘want-satisfaction’) suggests that people have a timebound conception of their own self-interest thatleads them to favor consumption in the presentover that in the future (Pearce and Turner, 1990;Field, 1997). According to Field (1997), ‘[a]nyperson normally will prefer a dollar today to adollar in 10 years’. I would suggest that myopicself-interest is culturally circumscribed. Whilethere are clear demarcations between the individ-ual and the group in modern Western conscious-ness, such distinctions often are blurred intraditional settings. In many instances, the ‘self-

W.G. Moseley / Ecological Economics 38 (2001) 317–326324

interest’ of the head of household is difficult toseparate from that of past, present and futurehousehold members.5 There are often a variety ofsocial mechanisms in place that put pressure onthe individual or household to think of the largercommunity (Gastellu, 1987; Logan, 1995). Fur-thermore, the time horizon of ‘self-interest’ oftenencompasses the short, medium and long term. Inbalancing the cost of current food expenditureversus capital preservation for the future, the headof household is simultaneously trying to ensurethe survival and health of household members inthe short term, the viability of a livelihood (orway of life) in the medium term, and the continu-ity and well-being of the family or clan in the longterm. As such, this broader definition of ‘self-in-terest’ is anything but individualistic or myopic,but simultaneously spans a larger group of peopleand a number of time frames.

5. Conclusion

Research by food security analysts in Africasuggests that the poor often knowingly eat less inthe present in order to preserve productive capitaland improve their chances of producing food inthe future. These findings cast doubt on the con-ventional wisdom that poor households have ahigh rate of time preference. The low rate of timepreference by the poor also calls into questionwidely held views in the development communityregarding growth-driven conservation andpoverty-induced environmental degradation.

Furthermore, if there is a possibility that ratesof time preference are lower for the poorest of thepoor than previously imagined, then one maywish to consider the potential implications of thisfor discount rates used in the cost–benefit analy-sis of development projects in the poorest areas ofAfrica or other world regions. Discount rates aretheoretically related to the rate of time preferenceand the opportunity cost of capital (Krutilla andFisher, 1975; Pearce and Turner, 1990; Field,1997). Projects in the private sector often rely on

the opportunity cost of capital (or the interestrate) to establish a discount rate. It is disputedwhether the discount rate for public sectorprojects should be based on the opportunity costof capital or a social discount rate that is moreclosely associated with the rate of time preference(Pearce and Turner, 1990).6 In the past, the WorldBank has recommended that the standard oppor-tunity cost of capital be used as the discount rate(World Bank, 1991). Development economistshave typically suggested a discount rate of 10%for projects in developing countries based on thisopportunity cost criterion (see, Lutz and Munas-inghe, 1994). Lumley (1997) suggests that it isbetter to go with the social rate of time preferenceas government and individuals are different thancorporations in that they must consider a widerrange of issues than just profit. ‘Intergenerationalconsiderations may be better understood by as-sessing the way that individual decision makersaccommodate their private discount rates whenthey make decisions which affect the environment’(Lumley, 1997).

Other authors (e.g. Quirk and Terasawa, 1987;Gramlich, 1990) have suggested that the choice ofa discount rate should be related to the source offunding for a project. Projects financed by fundsfrom the capital markets should use the opportu-nity cost of capital as the discount rate. However,projects financed by a reduction in current con-sumption, i.e. taxation, should employ the socialrate of time preference as the discount rate. Iwould argue that most development projects inthe poorest African countries are either fundedthrough government taxation or grants and loansfrom development agencies. In the case of fundingfrom development agencies, the opportunity costsmust be viewed in terms of the potential benefitsfrom other development projects rather than the

6 The choice of an appropriate discount rate for the cost–benefit analysis of public sector projects is highly controversial(Pearce and Turner, 1990; Tisdell, 1991; Field, 1997). Manyauthors assert that the use of a high discount rate, or anydiscount rate at all, leads to a short-sighted assessment of costsand benefits that often proves damaging for the environment(Daly and Cobb, 1989; Hueting, 1991; Gowdy and McDaniel,1995; Rabl, 1996) and inter-generational equity (Quirk andTerasawa, 1987; Costanza, 1991; Pasek, 1992).

5 It is noted that the household in this context is very oftena large, extended family unit rather than a nuclear family.

W.G. Moseley / Ecological Economics 38 (2001) 317–326 325

private sector. In either case, local people’s ownwillingness to invest in the future (their rate of timepreference) seems to be the most appropriate deter-minant of a discount rate as they are either payingfor these projects indirectly through taxes or theprojects are funded from a pool of money used forsimilar projects in other poor communities (whoare likely to have a similarly low rate of timepreference).

If one accepts that the rate of time preferencemay be more appropriate than the opportunity costof capital as a determinant of discount rates for usein the cost–benefit analysis of development projectsin the poorest African countries, then it would seemreasonable to re-examine standard discount ratesgiven that time preference rates for the poor maynot be as high as previously thought. Further studyby economists of the behavior of food insecurehouseholds in rural Africa may help the academyand policymakers better understand rates of timepreference for the poor. While this article hasundoubtedly presented more questions than an-swers, it has hopefully highlighted problems withcurrent theory and policy and given cause forreassessment of both.

Acknowledgements

I am grateful to B. Ikubolajeh Logan, SarahLumley, Jack Houston, Herman Daly and threeanonymous reviewers for comments on earlierversions of this manuscript. I would also like tothank all of those who gave me feedback on arelated presentation at the Annual Meeting of theAfrican Studies Association in Nashville, TN(2000).

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