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Justifying Social Discounting: The Rank-Discounted Utilitarian Approach

Author

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  • Stéphane Zuber
  • Geir B. Asheim

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

  • Stéphane Zuber & Geir B. Asheim, 2010. "Justifying Social Discounting: The Rank-Discounted Utilitarian Approach," CESifo Working Paper Series 3192, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3192
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    File URL: https://www.cesifo-group.de/DocDL/cesifo1_wp3192.pdf
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    References listed on IDEAS

    as
    1. Asheim, Geir B. & Buchholz, Wolfgang & Tungodden, Bertil, 2001. "Justifying Sustainability," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 252-268, May.
    2. Van Liedekerke, Luc & Lauwers, Luc, 1997. "Sacrificing the Patrol: Utilitarianism, Future Generations and Infinity," Economics and Philosophy, Cambridge University Press, vol. 13(2), pages 159-174, October.
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    Cited by:

    1. 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.
    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, vol. 86(2), pages 295-305.
    4. Piacquadio, Paolo G., 2015. "The Ethics of Intergenerational Risk," Memorandum 15/2015, Oslo University, Department of Economics.
    5. Loïc Berger & Johannes Emmerling, 2017. "Welfare as Simple(x) Equity Equivalents," Working Papers 2017.14, Fondazione Eni Enrico Mattei.
    6. Rubinchik, Anna, 2015. "The chase of a multi-armed economist for the elusive social discount rate," Working Papers WP2015/8, University of Haifa, Department of Economics, revised 18 Nov 2015.
    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. 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, vol. 41(4), pages 819-834, October.
    9. 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.
    10. Geir B. Asheim & Stéphane Zuber, 2014. "Probability Adjusted Rank-Discounted Utilitarianism," CESifo Working Paper Series 4728, CESifo Group Munich.
    11. Asheim, Geir B. & Zuber, Stéphane, 2014. "Escaping the repugnant conclusion: rank-discounted utilitarianism with variable population," Theoretical Economics, Econometric Society, vol. 9(3), September.
    12. Asheim, Geir B. & Zuber, Stéphane, 2015. "Evaluating Intergenerational Risks: Probabillity Adjusted Rank-Discounted Utilitarianism," Memorandum 06/2015, Oslo University, Department of Economics.
    13. 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, vol. 41(4), pages 819-834, October.
    14. 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.
    15. 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.

    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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