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The limit of discounted utilitarianism

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  • Jonsson, Adam

    ()
    (Department of Engineering Sciences and Mathematics)

  • Voorneveld, Mark

    ()
    (Dept. of Economics, Stockholm School of Economics)

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    Abstract

    This paper presents an infinite-horizon version of intergenerational utilitarianism that is both satisfactorily complete and consistent. By studying discounted utilitarianism as the discount factor tends to one, we obtain a welfare criterion --- limit-discounted utilitarianism --- that combines efficiency and equal treatment of generations with analytical tractability and a high degree of comparability. We show that limit-discounted utilitarianism satisfies a number of consistency properties; in particular, it provides (i) an intuitive link between preferences over infinite-horizon streams and large, but finite-horizon truncations, and (ii) a complete view of the consequences of delaying streams with well-defined averages. The limit-discounted utilitarian criterion is characterized on a large domain of infinite utility streams.

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    Bibliographic Info

    Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 748.

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    Length: 19 pages
    Date of creation: 17 Mar 2014
    Date of revision: 24 Apr 2014
    Handle: RePEc:hhs:hastef:0748

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    Related research

    Keywords: Intergenerational equity; aggregating infinite utility streams; ethical social welfare relations;

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    1. Basu, Kaushik & Mitra, Tapan, 2003. "Aggregating Infinite Utility Streams with Inter-generational Equity: The Impossibility of Being Paretian," Working Papers 03-03, Cornell University, Center for Analytic Economics.
    2. Asheim,G.B. & Buchholz,W. & Tungodden,B., 1999. "Justifying sustainability," Memorandum 08/1999, Oslo University, Department of Economics.
    3. Geir B. Asheim & Kuntal Banerjee, 2009. "Fixed-step anonymous overtaking and catching-up," Working Papers 09001, Department of Economics, College of Business, Florida Atlantic University.
    4. M. Fleurbaey & P. Michel, 1997. "Intertemporal equity and the extension of the Ramsey criterion," THEMA Working Papers 97-11, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    5. Sakai, Toyotaka, 2008. "Intergenerational equity and an explicit construction of welfare criteria," PIE/CIS Discussion Paper 395, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    6. ASHEIM, Geir B. & d’ASPREMONT, Claude & BANERJEE, Kuntal, 2008. "Generalized time-invariant overtaking," CORE Discussion Papers 2008065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Basu, Kaushik & Mitra, Tapan, 2007. "Utilitarianism for infinite utility streams: A new welfare criterion and its axiomatic characterization," Journal of Economic Theory, Elsevier, vol. 133(1), pages 350-373, March.
    8. Dutta, P.K., 1991. "What Do Discounted Optima Converge To? A Theory of Discount Rate Asymptotics in Economic Models," RCER Working Papers 264, University of Rochester - Center for Economic Research (RCER).
    9. Luc LAUWERS, 2009. "Ordering infinite utility streams comes at the cost of a non-Ramsey set," Center for Economic Studies - Discussion papers ces09.05, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
    10. Brock, William A, 1970. "An Axiomatic Basis for the Ramsey- Weizsacker Overtaking Criterion," Econometrica, Econometric Society, vol. 38(6), pages 927-29, November.
    11. Dutta, Prajit K., 1991. "What do discounted optima converge to?: A theory of discount rate asymptotics in economic models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 64-94, October.
    12. Svensson, Lars-Gunnar, 1980. "Equity among Generations," Econometrica, Econometric Society, vol. 48(5), pages 1251-56, July.
    13. Banerjee, Kuntal & Dubey, Ram, 2011. "Impatience for Weakly Paretian Orders: Existence and Genericity," Working Papers 2011-03, Department of Economics, Colgate University.
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