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How stationarity contradicts intergenerational equity

Author

Listed:
  • Geir B. Asheim

    (University of Oslo)

  • Kuntal Banerjee

    (Florida Atlantic University)

  • Tapan Mitra

    (Cornell University)

Abstract

We show how the condition of stationarity may contradict intergenerational equity. By formalizing the intuition that less sensitivity remains for the continuation of the stream if sensitivity for the interests of the present is combined with stationarity, we point out conflicts (a) between stationarity and the requirement of not letting the present be dictatorial, and (b) between stationarity and equal treatment of generations. We use the results to interpret the non-stationarity of the Chichilnisky and Rank-discounted utilitarian social welfare functions. Non-stationarity combined with time invariance leads to time inconsistency. We illustrate how such non-stationary social welfare functions can be applied in the Ramsey model if time invariance is imposed.

Suggested Citation

  • Geir B. Asheim & Kuntal Banerjee & Tapan Mitra, 2021. "How stationarity contradicts intergenerational equity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(2), pages 423-444, September.
    • Handle: RePEc:spr:joecth:v:72:y:2021:i:2:d:10.1007_s00199-020-01296-8
    DOI: 10.1007/s00199-020-01296-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Intergenerational equity; Stationarity; Time inconsistency;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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