EA - A review of GiveWell's discount rate by Rethink Priorities

Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: A review of GiveWell's discount rate, published by Rethink Priorities on November 21, 2023 on The Effective Altruism Forum.Editorial noteThis report was commissioned by GiveWell and produced by Rethink Priorities from June to July 2023. We revised this report for publication. GiveWell does not necessarily endorse our conclusions, nor do the organizations represented by those who were interviewed.The primary focus of the report is to review GiveWell's current formulation of its discount rate by recommending improvements and reinforcing justifications for areas that do not require improvement. Our research involved reviewing the scientific and gray literature, and we spoke with 15 experts and stakeholders.We don't intend this report to be Rethink Priorities' final word on discount rates, and we have tried to flag major sources of uncertainty in the report. We hope this report galvanizes a productive conversation within the global health and development community about discounting practices in cost-effectiveness analyses. We are open to revising our views as more information is uncovered.Executive summaryNotes on the scope and process of this projectThis project aims to serve the dual purposes of reviewing GiveWell's current approach to calculating its discount rate(s) to:Provide recommendations to GiveWell on how its approach to discount rates could be improved.Strengthen the justifications for its approach in cases where we do not recommend changes.The direction of this project was mainly guided by our priors[1] that a prioritized investigation into three aspects could potentially make the biggest difference to GiveWell's discount rate:A review of how other major organizations in the global health and development space (within and outside effective altruism) choose and justify their discount rates.A review of GiveWell's overall approach to calculating discount rates to determine:Whether GiveWell should use a different overall calculation approach.Whether GiveWell should think differently about discounting consumption vs. health outcomes.A review of the pure time preference component of GiveWell's discount rate.We also reviewed several other components of the discount rate (consumption growth rate, compounding non-monetary benefits, temporal uncertainty), but decided to spend less time on those as we deemed it less likely to make major recommendations or expected it would be harder to make meaningful progress. Table 1 summarizes our recommendations for GiveWell's discounting practices.The majority of this report focuses on the discount rate used for consumption benefits, as this appears to be the "main" discount rate used by GiveWell,[2] but we also discuss discounting of health benefits.We do not discuss discounting of costs in this report as (1) GiveWell's cost-effectiveness models rarely involve discounting costs, and (2) our general impression is that the typical approach across organizations is to discount monetary costs and benefits equally and we have seen very little discussion of alternative approaches.[3] A review of the shape of the utility functions[4] used is also out of scope for this review.Moreover, we focus exclusively on temporal discounting.[5] If the time frame is not specified, all discount rates expressed as percentages are annual. Due to the variety of existing opinions and approaches with respect to discount rates and a relative lack of consensus, we opted to approach this project from a perspective of figuring out whether there are any compelling reasons to change GiveWell's current approach, rather than starting from scratch and coming up with a discount rate independently of the current approach.Summary of recommendationsTable 1: Summary of Rethink Priorities' recommendations for GiveWell's discountingConsiderationCurre...