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Population, Impartiality and Sustainability in the Neoclassical Growth Model

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  • Leslie M. Shiell

    (Department of Economics, University of Ottawa)

Abstract

A resolution is offered to Koopmans’ (1965, 1967a) "paradox of the indefinitely postponed splurge"-i.e. the incompatibility of undiscounted utilitarianism and population weighting in the context of the infinite-horizon neoclassical growth model with exponential population growth. The resolution builds on the conflict between splurging (i.e. dissaving) and sustainability. Consumption paths which contain splurges are not sustained, because they involve reductions in consumption at some point. Thus disallowing unsustained paths removes the incentive to save for a splurge. A modified utilitarian objective is presented which embodies the commitment to sustainability, as well as impartiality and the golden rule. Maximization over the neoclassical technology yields a monotonically increasing path to the golden rule. The underlying ethical position is described as an intergenerational contract: early generations are willing to sacrifice some consumption to build up the capital stock while future generations are morally obligated to limit consumption to the golden rule.

Suggested Citation

  • Leslie M. Shiell, 2005. "Population, Impartiality and Sustainability in the Neoclassical Growth Model," Working Papers 0504E, University of Ottawa, Department of Economics.
  • Handle: RePEc:ott:wpaper:0504e
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    References listed on IDEAS

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    More about this item

    Keywords

    population weighting; impartiality; utilitarianism; neoclassical growth model;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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