The Importance of the Relationship Between Growth Rates & Discount Rates in Assessing the Value of Economic Damages

Abstract

Examining the implied net discount rates in the reports of several economists, we illustrate how easily these economists end up increasing, when they should be, decreasing to present value. To avoid this trap, when experts use data from different sources and time periods, they should insure, the relationship between their growth and discount rates is theoretically and empirically sound, and their valuation model is independent of the decision to invest the amount of an award.