Discounting, “[t]he procedure for determining the present value of a future dollar,” has long been recognized as a crucial element in the calculation of tort damages. Following decades of application by state courts in the late nineteenth and early twentieth centuries, the notion that future economic losses must be discounted to present-day value first received express endorsement from the U.S. Supreme Court in 1916. In the ninety years that followed, the use of discount rates in computing tort damages became firmly established in American jurisprudence and widely practiced by courts. More recently, discounting has also become indispensable to the executive branch of the federal government in the economic analysis of its regulations. Since 1981, when President Reagan’s Executive Order 12291 first mandated cost-benefit analysis for all major federal regulations, 6 federal agencies such as the Environmental Protection Agency, the Food and Drug Administration, and the Department of Housing and Urban Development have routinely discounted and compared future costs and benefits to study the impact and desirability of proposed regulations.
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