Sustainability in a Risky World

28 Pages Posted: 30 Mar 2021

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Ian Martin

London School of Economics & Political Science (LSE) - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: March 30, 2021

Abstract

This paper studies the restrictions on consumption, portfolio choice, and social discounting implied by a sustainability constraint, that utility should not be expected to decline over time, in an economy with risky investment opportunities. The sustainability constraint does not distort portfolio choice and implies a consumption-wealth ratio and social discount rate that can be considerably higher than the riskless interest rate.

Keywords: Sustainability, social discounting, consumption-wealth ratio, rate of time preference

JEL Classification: G11, H43, Q01

Suggested Citation

Campbell, John Y. and Martin, Ian W. R., Sustainability in a Risky World (March 30, 2021). Available at SSRN: https://ssrn.com/abstract=3815370 or http://dx.doi.org/10.2139/ssrn.3815370

John Y. Campbell (Contact Author)

Harvard University - Department of Economics ( email )

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HOME PAGE: http://scholar.harvard.edu/campbell

National Bureau of Economic Research (NBER)

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Ian W. R. Martin

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/martiniw/

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