Discounting

{
  "id": "MLC-T-ENV-008137",
  "term": "Discounting",
  "field": "Environment",
  "definition": "1. The treatment of time in valuing costs and benefits, that is, the adjustment of costs and benefits to their present values, requiring a choice of discount rate and time.\n\n2. A widely used economic procedure that weights, through application of a discount rate, past and future benefits or costs such that they are comparable to present benefits and costs. Discounting reflects a sense that a benefit received today is considered more valuable than one received in the future. Discounting often is used in Natural Resource Damage Assessment (NRDA) to scale restoration projects or to establish appropriate monetary compensation for ecological services lost as a result of chemical releases or spills. (derived from NOAA 1999; also see Munns et al. 2009)\n\n3. The process of calculating the present value of a project on the basis of the current value of the projected stream of costs throughout the project's lifetime.\n\n4. The process used in cost analyses to reduce mathematically future costs and/or benefits/outcomes to their present value. These adjustments reflect that given levels of costs and benefits occurring in the future usually have less value in the present than the same levels of costs and benefits realized in the present.\n\n5. A method for adjusting the value of future costs and benefits to an equivalent value today to account for time preference and opportunity cost, that is, a dollar today is worth more than a dollar a year from now (even if inflation is not considered).\n\n6. A widely used economic procedure that weights, through application of a discount rate, past and future benefits or costs such that they are comparable to present benefits and costs. Discounting reflects a sense that a benefit received today is considered more valuable than one received in the future. Discounting often is used in Natural Resource Damage Assessment (NRDA) to scale restoration projects or to establish appropriate monetary compensation for ecological services lost as a result of chemical releases or spills.\n\n7. The process used in cost analyses to reduce mathematically future costs and/or benefits/outcomes to their present value. These adjustments reflect that given levels of costs and benefits occurring in the future usually have less value in the present than the same levels of costs and benefits realized in the present. [NLM/NICHSR 2004]\n\n8. A process by which benefits or costs realized in future periods are converted to their present value. Discounting adjusts for the time value of money (i. e., a dollar one possesses now is worth more than a dollar that one will receive in two years, since it could have been invested and earned interest in the intervening period). Discounting also incorporates assumptions about future inflation effects. [NYS 1998]\n\n9. A method for adjusting the value of future costs and benefits to an equivalent value today to account for time preference and opportunity cost, that is, a dollar today is worth more than a dollar a year from now (even if inflation is not considered). [USDA 2004]",
  "subject": "Policy and guidance",
  "references": [
    "Program Evaluation Glossary",
    "Core Ecosystem Services Research Program Standard Lexicon",
    "Watershed Planning Glossary of Terms",
    "NLM/NICHSR 2004",
    "USDA 2004",
    "MRA Thesaurus"
  ],
  "url": "https://mlchart.com/terminology/environment/discounting/"
}