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Sustainable Preferences and Damage Abatement:Value Judgments and Implications for Consumption Streams

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  • John Creedy
  • Ross Guest

Abstract

This paper examines the implications of adopting alternative value judgements when evaluating future consumption streams in the context of damage abatement. The paper focusses on a form of ‘sustainable preferences’ designed to avoid either a dictatorship by present or by future generations which can arise when using a ‘standard’ social welfare function. Numerical examples are reported, based on a simple growth model, under alternative damage abatement parameters and welfare functions. The results illustrate how sustainable preferences effectively reduce the damages on future consumption by shifting consumption from the present to the future. This implies an intergenerational trade-off. An explicit policy of damage abatement under a standard social welfare function implies a similar intergenerational trade-off. However, the results suggest that damage abatement does not penalise current generations as much under sustainable preferences as it does under standard value judgements

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1026.

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Length: 27 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:mlb:wpaper:1026

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  1. David I. Laibson, 1996. "Hyperbolic Discount Functions, Undersaving, and Savings Policy," NBER Working Papers 5635, National Bureau of Economic Research, Inc.
  2. Graciela Chichilnisky, 1997. "What Is Sustainable Development?," Land Economics, University of Wisconsin Press, vol. 73(4), pages 467-491.
  3. Arrow, Kenneth J & Fisher, Anthony C, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 312-19, May.
  4. Li, Chuan-Zhong & Lofgren, Karl-Gustaf, 2000. "Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 236-250, November.
  5. Creedy, John & Guest, Ross, 2008. "Population ageing and intertemporal consumption: Representative agent versus social planner," Economic Modelling, Elsevier, vol. 25(3), pages 485-498, May.
  6. Heal, G., 1998. "Valuing the Future: Economic Theory and Sustainability," Papers 98-10, Columbia - Graduate School of Business.
  7. Padilla, Emilio, 2002. "Intergenerational equity and sustainability," Ecological Economics, Elsevier, vol. 41(1), pages 69-83, April.
  8. Stavins, Robert & Wagner, Alexander & Wagner, Gernot, 2002. "Interpreting Sustainability in Economic Terms: Dynamic Efficiency Plus Intergenerational Equity," Working Paper Series rwp02-018, Harvard University, John F. Kennedy School of Government.
  9. Solow, Robert, 1993. "An almost practical step toward sustainability," Resources Policy, Elsevier, vol. 19(3), pages 162-172, September.
  10. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
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