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Justifying social discounting: The rank-discounted utilitarian approach

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  • Zuber, Stéphane
  • Asheim, Geir B.

Abstract

The discounted utilitarian criterion for infinite horizon social choice has been criticized for treating generations unequally. We propose an extended rank-discounted utilitarian (ERDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing streams, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. We show that more inequality averse ERDU societies have higher social discount rates when future generations are better off. We apply the ERDU approach in two benchmark economic growth models and prove that it promotes sustainable policies that maximize discounted utilitarian welfare.

Suggested Citation

  • Zuber, Stéphane & Asheim, Geir B., 2012. "Justifying social discounting: The rank-discounted utilitarian approach," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1572-1601.
  • Handle: RePEc:eee:jetheo:v:147:y:2012:i:4:p:1572-1601 DOI: 10.1016/j.jet.2011.08.001
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    Cited by:

    1. Asheim, Geir B. & Zuber, Stéphane, 2016. "Evaluating intergenerational risks," Journal of Mathematical Economics, Elsevier, pages 104-117.
    2. Alcantud, José Carlos R., 2013. "Fuzzy sets from the ethics of social preferences," MPRA Paper 53549, University Library of Munich, Germany.
    3. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, pages 295-305.
    4. Gajdos, Thibault & Weymark, John A., 2012. "Introduction to inequality and risk," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1313-1330.
    5. Moxnes, Erling, 2014. "Discounting, climate and sustainability," Ecological Economics, Elsevier, vol. 102(C), pages 158-166.
    6. Hultkrantz, Lars & A. Krüger, Niclas & Mantalos, Panagiotis, 2014. "Risk-adjusted long-term social rates of discount for transportation infrastructure investment," Research in Transportation Economics, Elsevier, vol. 47(C), pages 70-81.
    7. Dietz, Simon & Asheim, Geir B., 2012. "Climate policy under sustainable discounted utilitarianism," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 321-335.
    8. Gerlagh, Reyer, 2017. "Generous Sustainability," Ecological Economics, Elsevier, vol. 136(C), pages 94-100.
    9. Christine Carmody, 2012. "Considering future generations - sustainability in theory and practice," Economic Roundup, The Treasury, Australian Government, issue 3, pages 65-91, October.
    10. Figuières, Charles & Long, Ngo Van & Tidball, Mabel, 2017. "The MBR intertemporal choice criterion and Rawls’ just savings principle," Mathematical Social Sciences, Elsevier, pages 11-22.
    11. Geir B. Asheim & Stéphane Zuber, 2014. "Probability Adjusted Rank-Discounted Utilitarianism," CESifo Working Paper Series 4728, CESifo Group Munich.
    12. Mitra, Tapan & Asheim, Geir B. & Buchholz, Wolfgang & Withagen, Cees, 2013. "Characterizing the sustainability problem in an exhaustible resource model," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2164-2182.
    13. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    14. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, risk and inequality: A general approach," Journal of Public Economics, Elsevier, vol. 128(C), pages 34-49.
    15. Geir B. Asheim & Frikk Nesje, 2016. "Destructive Intergenerational Altruism," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 957-984.
    16. Geir B. Asheim & Ivar Ekeland, 2016. "Resource conservation across generations in a Ramsey–Chichilnisky model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(4), pages 611-639, April.
    17. Asheim, Geir B. & Zuber, Stéphane, 2014. "Escaping the repugnant conclusion: rank-discounted utilitarianism with variable population," Theoretical Economics, Econometric Society.
    18. Geir B. Asheim, 2017. "Sustainable growth," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 825-848, December.
    19. Geir Asheim & Stéphane Zuber, 2013. "A complete and strongly anonymous leximin relation on infinite streams," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, pages 819-834.
    20. Castellano, Rosella & Cerqueti, Roy & Spinesi, Luca, 2016. "Sustainable management of fossil fuels: A dynamic stochastic optimization approach with jump-diffusion," European Journal of Operational Research, Elsevier, vol. 255(1), pages 288-297.
    21. Tol, Richard S.J., 2013. "Climate policy with Bentham–Rawls preferences," Economics Letters, Elsevier, vol. 118(3), pages 424-428.
    22. Asheim, Geir B. & Zuber, Stéphane, 2015. "Evaluating Intergenerational Risks: Probabillity Adjusted Rank-Discounted Utilitarianism," Memorandum 06/2015, Oslo University, Department of Economics.
    23. Kohei Kamaga, 2016. "Infinite-horizon social evaluation with variable population size," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(1), pages 207-232, June.

    More about this item

    Keywords

    Intergenerational equity; Social discounting; Discounted utilitarianism; Sustainability;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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