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A Biological Theory of Social Discounting

Author

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  • Arthur J. Robson
  • Balázs Szentes

Abstract

We consider a growth model in which intergenerational transfers are made via stocks of private and public capital. Private capital is the outcome of individuals' private savings while decisions regarding public capital are made collectively. We hypothesize that private saving choices evolve through individual selection while public saving decisions are the result of group selection. The main result of the paper is that the equilibrium rate of return to private capital is at least 2-3% more than the rate of return to public capital. In other words, social choices involving intertemporal trade-offs exhibit much more patience than individual choices do.

Suggested Citation

  • Arthur J. Robson & Balázs Szentes, 2014. "A Biological Theory of Social Discounting," American Economic Review, American Economic Association, vol. 104(11), pages 3481-3497, November.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:11:p:3481-97 Note: DOI: 10.1257/aer.104.11.3481
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    References listed on IDEAS

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    1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, pages 460-481.
    2. Ted Bergstrom, "undated". "On the Evolution of Altruistic Ethical Rules for Siblings," Papers _023, University of Michigan, Department of Economics.
    3. Bergstrom, Theodore C, 1995. "On the Evolution of Altruistic Ethical Rules for Siblings," American Economic Review, American Economic Association, pages 58-81.
    4. Binmore, Ken, 2005. "Natural Justice," OUP Catalogue, Oxford University Press, number 9780195178111.
    5. Antonio Afonso & Miguel St. Aubyn, 2010. "Public and private investment rates of return: evidence for industrialized countries," Applied Economics Letters, Taylor & Francis Journals, vol. 17(9), pages 839-843.
    6. Arthur J. Robson & Balazs Szentes & Emil Iantchev, 2012. "The Evolutionary Basis of Time Preference: Intergenerational Transfers and Sex," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 172-201, November.
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    Citations

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    Cited by:

    1. Laurent Denant-Boemont & Enrico Diecidue & Olivier l’Haridon, 2017. "Patience and time consistency in collective decisions," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 181-208, March.
    2. Alger, Ingela & Weibull, Jörgen W., 2016. "Evolution and Kantian morality," Games and Economic Behavior, Elsevier, vol. 98(C), pages 56-67.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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