Combining Rights and Welfarism: A New Approach to Intertemporal Evaluation of Social Alternatives
AbstractWe 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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Bibliographic InfoPaper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 01-2012.
Length: 46 pages
Date of creation: 2012
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Rights; Intergenerational Equity; Welfare; Sustainability;
Other versions of this item:
- Ngo Van Long & Vincent Martinet, 2012. "Combining Rights and Welfarism: A New Approach to Intertemporal Evaluation of Social Alternatives," CESifo Working Paper Series 3746, CESifo Group Munich.
- Vincent Martinet & Ngo Van Long, 2012. "Combining Rights and Welfarism: a new approach to intertemporal evaluation of social alternatives," EconomiX Working Papers 2012-14, University of Paris West - Nanterre la Défense, EconomiX.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
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