5. The social rate of discount. In our discussion of the shadow price of savings,
we mentioned the need for governments to choose appropriate discount
rates in calculating the worth of project benefits and costs that occur over
time. The social rate of discount (also sometimes referred to as social time preference)
is essentially a price of time—the rate used to calculate the net present
value of a time stream of project benefits and costs where the net present
value (NPV) is calculated as