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Justifying social discounting: the rank-discounted utilitarian approach

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  • ZUBER, Stéphane

    ()
    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics, B-1348 Louvain-la-Neuve, Belgium)

Abstract

The popular discounted utilitarian criterion for infinite horizon social choice has been criticized on the ground that it treats successive generations unfairly. I propose to evaluate intergenerational welfare with a rank- discounted utilitarian (RDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing paths, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. I show that more inequality averse RDU societies have higher social discount rates when future generations are better-off. I apply the RDU approach in two benchmark economic growth models and I prove that it promotes sustainable policies maximizing discounted utility.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010036.

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Date of creation: 01 Jul 2010
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Handle: RePEc:cor:louvco:2010036

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Keywords: intergenerational equity; social discounting; discounted utilitarianism; sustainability;

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Citations

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Cited by:
  1. Geir B. Asheim & Stéphane Zuber, 2012. "Escaping the Repugnant Conclusion: Rank-Discounted Utilitarianism with Variable Population," CESifo Working Paper Series 3958, CESifo Group Munich.
  2. Geir B. Asheim & Stéphane Zuber, 2011. "A Complete and Strongly Anonymous Leximin Relation on Infinite Streams," CESifo Working Paper Series 3578, CESifo Group Munich.
  3. Richard S.J. Tol, 2012. "Climate Policy with Bentham-Rawls Preferences," Working Paper Series 3812, Department of Economics, University of Sussex.
  4. Simon Dietz & Geir B. Asheim, 2011. "Climate policy under sustainable discounted utilitarianism," Grantham Research Institute on Climate Change and the Environment Working Papers 42, Grantham Research Institute on Climate Change and the Environment.
  5. Mitra, Tapan & Asheim, Geir B. & Buchholz, Wolfgang & Withagen, Cees, 2013. "Characterizing the sustainability problem in an exhaustible resource model," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2164-2182.
  6. May Elsayyad & Kai A. Konrad, 2011. "Fighting Multiple Tax Havens," Working Papers fighting_multiple_tax_hav, Max Planck Institute for Tax Law and Public Finance.
  7. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
  8. Alcantud, José Carlos R., 2013. "Fuzzy sets from the ethics of social preferences," MPRA Paper 53549, University Library of Munich, Germany.
  9. Gajdos, Thibault & Weymark, John A., 2012. "Introduction to inequality and risk," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1313-1330.

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