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Sustainable preferences via nondiscounted, hyperreal intergenerational welfare functions

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  • Pivato, Marcus

Abstract

We define an intergenerational social welfare function Sigma from |R^|N (the set of all infinite-horizon utility streams) into *|R (the ordered field of hyperreal numbers). The function Sigma is continuous, linear, and increasing, and is well-defined even on unbounded (e.g. exponentially increasing) utility streams. This yields a complete social welfare ordering on |R^|N which is Pareto and treats all generations equally (i.e. does not discount future utility). In particular, it is what Chichilnisky (1996) calls a `sustainable' preference ordering: it is neither a `dictatorship of the present' nor a `dictatorship of the future'. We then show how an agent with no `pure' time preferences may still `informationally discount' the future, due to uncertainty. Last, we model intergenerational choice for an exponentially growing economy and population. In one parameter regime, our model shows `instrumental discounting' due to declining marginal utility of wealth. In another regime, we see a disturbing `Paradox of Eternal Deferral'.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7461.

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Date of creation: 05 Mar 2008
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Handle: RePEc:pra:mprapa:7461

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Keywords: intergenerational choice; intertemporal choice; infinite-horizon; nondiscounted; sustainable; hyperreal; nonstandard real numbers; nonstandard analysis;

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  1. Brown, Donald J & Lewis, Lucinda M, 1981. "Myopic Economic Agents," Econometrica, Econometric Society, vol. 49(2), pages 359-68, March.
  2. Chichilnisky, Graciela, 1995. "An axiomatic approach to sustainable development," MPRA Paper 8609, University Library of Munich, Germany.
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  10. Graciela Chichilnisky & Geoffrey Heal, 1997. "Social choice with infinite populations: construction of a rule and impossibility results," Social Choice and Welfare, Springer, vol. 14(2), pages 303-318.
  11. Luc Lauwers, 1999. "Topological Social Choice," Center for Economic Studies - Discussion papers ces9912, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  12. Lauwers, Luc, 1993. "Infinite Chichilnisky rules," Economics Letters, Elsevier, vol. 42(4), pages 349-352.
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  14. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
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