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A Biological Theory of Social Discounting

Listed author(s):
  • Arthur J. Robson
  • Balázs Szentes

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.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.11.3481
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File URL: http://www.aeaweb.org/aer/ds/10411/20130531_ds.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 104 (2014)
Issue (Month): 11 (November)
Pages: 3481-3497

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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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  1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-481, June.
  2. Bergstrom, Theodore C, 1995. "On the Evolution of Altruistic Ethical Rules for Siblings," American Economic Review, American Economic Association, vol. 85(1), pages 58-81, March.
  3. Binmore, Ken, 2005. "Natural Justice," OUP Catalogue, Oxford University Press, number 9780195178111.
  4. 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.
  5. 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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