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Justifying Social Discounting: The Rank-Discounted Utilitarian Approach

  • Stéphane Zuber
  • Geir B. Asheim

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.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3192.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3192
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