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Combining Rights and Welfarism: A New Approach to Intertemporal Evaluation of Social Alternatives

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  • Ngo Van Long
  • Vincent Martinet

Abstract

We propose a new criterion which reflects both the concern for welfare (utility) and the concern for rights in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds (floors or ceilings on various quantitative indicators) that serve as constraints on actions and on levels of state variables. These thresholds are interpreted as minimal rights to be guaranteed to all generations. They are endogenously chosen within the set of all feasible thresholds, accounting for the “cost in terms of welfare” of achieving these rights. We apply the criterion to several examples, including the standard Dasgupta-Heal-Solow model of resource extraction and capital accumulation. We show that if the weight given to rights in the criterion is sufficiently high, the optimal solution may be on the threshold possibility frontier. The development path is then “driven” by the rights. In particular, if a minimal consumption is considered as a right, constant consumption can be optimal even with a positive utility discount rate. The shadow prices of thresholds play an important role in the determination of the rate of discount to be applied to social investment projects.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3746.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3746

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Keywords: rights; intergenerational equity; welfare; sustainability;

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References

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  1. Sen, Amartya, 1970. "The Impossibility of a Paretian Liberal," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 152-57, Jan.-Feb..
  2. Kenneth Stollery, 1998. "Constant Utility Paths and Irreversible Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 730-742, August.
  3. Chichilnisky, Graciela & Heal, Geoffrey & Beltratti, Andrea, 1995. "The Green Golden Rule," Economics Letters, Elsevier, vol. 49(2), pages 175-179, August.
  4. Sen, Amartya K, 1976. "Liberty, Unanimity and Rights," Economica, London School of Economics and Political Science, vol. 43(171), pages 217-45, August.
  5. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, April.
  6. Geir B. Asheim & Stéphane Zuber, 2011. "A Complete and Strongly Anonymous Leximin Relation on Infinite Streams," CESifo Working Paper Series 3578, CESifo Group Munich.
  7. Wulf Gaerther & Prasanta K. Pattanaik & Kotaro Suzumura, 1991. "Individual Rights Revisited," Discussion Paper Series a238, Institute of Economic Research, Hitotsubashi University.
    • Gaertner, Wulf & Pattanaik, Prasanta K & Suzumura, Kotaro, 1992. "Individual Rights Revisited," Economica, London School of Economics and Political Science, vol. 59(234), pages 161-77, May.
  8. Kotaro Suzumura, 2005. "An interview with Paul Samuelson: welfare economics, “old” and “new”, and social choice theory," Social Choice and Welfare, Springer, vol. 25(2), pages 327-356, December.
  9. Sugden, Robert, 1985. "Liberty, Preference, and Choice," Economics and Philosophy, Cambridge University Press, vol. 1(02), pages 213-229, October.
  10. Martinet, V. & Doyen, L., 2007. "Sustainability of an economy with an exhaustible resource: A viable control approach," Resource and Energy Economics, Elsevier, vol. 29(1), pages 17-39, January.
  11. Antoine D'Autume & John M. Hartwick & Katheline Schubert, 2009. "The Zero discounting and maximin optimal paths in a simple model of global warming," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00367917, HAL.
  12. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-44, June.
  13. Chichilnisky, Graciela, 1995. "An axiomatic approach to sustainable development," MPRA Paper 8609, University Library of Munich, Germany.
  14. Suzumura, Kotaro & Yoshihara, Naoki, 2006. "On Initial Conferment of Individual Rights," Discussion Paper Series a478, Institute of Economic Research, Hitotsubashi University.
  15. ALVAREZ-CUADRADO, Francisco & LONG, Ngo Van, 2007. "A Mixed Bentham-Rawls Criterion for Intergenerational Equity : Theory and Implications," Cahiers de recherche 06-2007, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  16. Long, Ngo Van, 1979. "Two Theorems on Generalized Diminishing Returns and Their Applications to Economic Analysis," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 58-63, March.
  17. Martinet, Vincent, 2011. "A characterization of sustainability with indicators," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 183-197, March.
  18. Sen, Amartya Kumar, 1970. "The Impossibility of a Paretian Liberal," Scholarly Articles 3612779, Harvard University Department of Economics.
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Cited by:
  1. Grossmann, Volker & Steger, Thomas M. & Trimborn, Timo, 2011. "The macroeconomics of TANSTAAFL," Working Papers 101, University of Leipzig, Faculty of Economics and Management Science.
  2. Michielsen, T.O., 2013. "Environmental Catastrophes Under Time-inconsistent Preferences," Discussion Paper 2013-013, Tilburg University, Center for Economic Research.
  3. Thomas Michielsen, 2013. "Environmental Catastrophes under Time-Inconsistent Preferences," Working Papers 2013.55, Fondazione Eni Enrico Mattei.

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