Future-biased Intergenerational Altruism

We show that intergenerational altruism suffers from future bias if generations overlap and people?s altruism concerns the well-being of immediate ancestors and descendants. Future bias involves preference reversals associated with increasing impatience, which can create a con?flict of interest between current and future governments representing living generations. We explore the implications of this con?flict for intergenerational redistribution when there is a sequence of utilitarian governments choosing policies independently over time. We show that future-biased governments can have an incentive to legislate and sustain a pay-as-you-go pension system, which can be understood, from the viewpoint of every government, as a self-enforcing commitment mechanism to increase future old-age transfers.