Justifying Social Discounting: The Rank-Discounted Utilitarian Approach
41 Pages Posted: 7 Oct 2010
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Malleability of Undiscounted Utilitarianism as a Criterion of Intergenerational Justice
By Geir B. Asheim and Wolfgang Buchholz
-
Discounting and Welfare Analysis Over Time: Choosing the à3B7
By Wolfgang Buchholz and Jan Schumacher
-
New Frontiers in the Economics of Climate Change
By Simon Dietz and David J. Maddison