Intergenerational Justice When Future Worlds are Uncertain

Posted: 10 Apr 2009

See all articles by Humberto Llavador

Humberto Llavador

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

John E. Roemer

Yale University - Department of Political Science; Yale University - Cowles Foundation

Joaquim Silvestre

University of California, Davis - Department of Economics

Date Written: April 9, 2009

Abstract

Suppose that there exists a positive (exogenous) probability that at each date of a possibly infinite future, the human species will disappear. We postulate an Ethical Observer (EO) who must solve an intertemporal welfare maximization problem under this kind of uncertainty, with preferences that satisfy the expected utility hypothesis. Various social welfare criteria are expressed as alternative von Neumann- Morgenstern utility functions for the EO: utilitarianism, Rawlsianism, and an extension of the latter that corrects for the size of population. Our analysis covers, first, a simple cake-eating economy, where the utilitarian and Rawlsian recommend the same intergenerational allocation. Second, we consider a productive economy with education and capital. There, however, the recommendations of the two Ethical Observers are in general (but not always) different. Surprisingly, when the utilitarian optimization program diverges, then it is optimal for the extended Rawlsian to ignore the uncertainty concerning the possible disappearance of the human species in the future. We conclude with some thoughts about what these results imply for the issue of intergenerational welfare maximization in the presence of global warming.

Keywords: Discounted utilitarianism, Rawlsian, Sustainability, Maximin, Uncertainty, Expected utility, von Neumann-Morgenstern, Dynamic welfare maximization

JEL Classification: D63, D81, O40, Q54, Q56

Suggested Citation

Llavador, Humberto and Roemer, John E. and Silvestre, Joaquim, Intergenerational Justice When Future Worlds are Uncertain (April 9, 2009). Cowles Foundation Discussion Paper No. 1692. Available at SSRN: https://ssrn.com/abstract=1375563

Humberto Llavador

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34) 93 542 23 81 (Phone)
(34) 93 542 17 46 (Fax)

John E. Roemer (Contact Author)

Yale University - Department of Political Science ( email )

Box 208269
New Haven, DC 06520-8269
United States
203-432-5249 (Phone)
203-432-6196 (Fax)

HOME PAGE: http://pantheon.yale.edu/~jer39/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Joaquim Silvestre

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States

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