What is the Net Discount Rate?
The net discount rate (sometimes also called “net real interest rate”) is the geometric difference between the interest rate used as a discount rate and rate of increase in a worker’s wages. It differs from the real interest rate, which is the geometric difference between the discount rate and the rate of inflation, though in recent years the two rates have been quite similar. Some economists argue that the below market discount rate referred to in the Pfeifer and Culver II federal court cases is synonymous with the net discount rate, while others argue that the below market discount rate can refer to either the net discount rate of the real interest rate.
