Justifying Social Discounting: The Rank-Discounted Utilitarian Approach

41 Pages Posted: 7 Oct 2010

See all articles by Stephane Zuber

Stephane Zuber

Ecole Normale Superieure (ENS)

Geir B. Asheim

University of Oslo - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 30, 2010

Abstract

The discounted utilitarian criterion for infinite horizon social choice has been criticized for treating generations unequally. We propose an extended rank-discounted utilitarian (ERDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing streams, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. We show that more inequality averse ERDU societies have higher social discount rates when future generations are better-off. We apply the ERDU approach in two benchmark economic growth models and prove that it promotes sustainable policies that maximize discounted utilitarian welfare.

Keywords: intergenerational equity, social discounting, discounted utilitarianism, sustainability

JEL Classification: D63, H43, Q56

Suggested Citation

Zuber, Stephane and Asheim, Geir B., Justifying Social Discounting: The Rank-Discounted Utilitarian Approach (September 30, 2010). CESifo Working Paper Series No. 3192, Available at SSRN: https://ssrn.com/abstract=1687577 or http://dx.doi.org/10.2139/ssrn.1687577

Stephane Zuber

Ecole Normale Superieure (ENS) ( email )

45, rue d'Ulm
F-75230 Paris Cedex 05
France

Geir B. Asheim (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47-2285 5498 (Phone)
+47-2285 5035 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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