Long-Run Institutions: How Can We Escape Short-Term Decision-Making?

Abstract: Public policy in relation to climate change requires people to consider future costs and benefits and to bring the future into the present. Given the seriousness of the problem, people have to weigh consequences far beyond their own lifetimes. But as JM Keynes pointed out, in the long run, we are all dead, so why worry about the future? Most policy now incorporates future costs and benefits into decision-making using a discount rate to calculate net present value. A high rate means that the future is unimportant; a low rate means that the future matters a lot. Thus, the debate centers around the appropriate discount rate. I develop an alternative institutional perspective that augments current formulaic approaches by documenting social arrangements where decision-makers have successfully included the interests of future generations and have, in effect, ignored Keynes. I consider several institutional examples to discern their common elements, motivating justifications, underlying patterns, and the critical role played by fiduciaries. These examples include early modern forestry management, gothic cathedrals, nuclear waste depositories, family trusts and estate planning, and conservation easements.