Evaluating Intergenerational Consequences by the Pareto Principle:Efficiency When Future Identities are Unobservable

Abstract

It has been claimed that the Pareto principle can evaluate efficiency-improving policies with long-lasting intergenerational consequences. Climate policies is a prime example, seeking to correct the externality that emitters of greenhouse gases do not pay for the future consequences of their emissions. However, climate policies may lead to different identities of future people, implying that the Pareto principle is not fully applicable. Assuming that there are infinitely many future people whose identities are not observable, we specify conditions under which their spatiotemporal positions do not matter. This implies that the Suppes-Sen principle whereby rank-ordered streams are compared plays an important role and justifies the following dominance relation: A state a dominates another state b if a Pareto dominates b for existing people and Suppes-Sen dominates b for future people, where one of the two need not be strict. We illustrate the properties of this dominance concept for policy choice.

Keywords: Climate change, Efficiency, Intergenerational equity, Population ethics, Infinite streams.