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How to Take Rights Seriously: A New Approach to the Intertemporal Evaluation of Social Alternatives

Listed author(s):
  • Ngo Van Long
  • Vincent Martinet

We propose a new criterion reflecting both the concern for rights and the concern for welfare in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds corresponding to floors or ceilings on various quantitative indicators. The resulting constraints on actions and on levels of state variables are interpreted as minimal rights to be guaranteed to all generations, for intergenerational equity purposes. The levels of these rights are endogenously chosen, accounting for the “cost in terms of welfare” of granting them. Such a criterion could embody the idea of sustainable development. We provide an axiomatization of such a criterion and characterize the tension between rights and welfare in a general economic framework. We apply the criterion to the standard Dasgupta-Heal-Solow model of resource extraction and capital accumulation. We show that if the weight given to rights in the criterion is sufficiently high, the optimal solution is on the threshold possibility frontier. The development path is then “driven” by the rights. Specifically, if a minimal consumption is considered as a right, constant consumption can be optimal even with a positive utility discount rate. In this case, the shadow value of the right plays an important role in the determination of the rate of discount to be applied to social investment projects. Nous proposons un nouveau critère reflétant à la fois le souci des droits et le souci du bien-être dans l’évaluation des sentiers de développement économique. La préoccupation pour les droits est saisie par une structure de préférences envers des combinaisons de seuils de divers indicateurs quantitatifs. Les contraintes sont interprétées comme des droits minimaux à garantir à toutes les générations. Les niveaux de ces droits sont choisis de façon endogène, en tenant compte du coût en termes de bien-être. Un tel critère pourrait incarner l’idée du développement durable. Nous caractérisons la tension entre droits et bien-être dans un cadre économique général. Nous appliquons le critère au modèle de Dasgupta-Heal-Solow. Nous montrons que si le poids accordé aux droits dans le critère est suffisamment élevé, la solution optimale se situe sur la frontière des seuils. Le chemin de développement est alors « piloté » par les droits. Plus précisément, si une consommation minimale est considérée comme un droit, la consommation constante peut être optimale même avec un taux d’actualisation positif. Dans ce cas, la valeur implicite du droit joue un rôle important dans la détermination du taux d’actualisation à appliquer aux projets d’investissement social.

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File URL: http://www.cirano.qc.ca/files/publications/2016s-60.pdf
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Paper provided by CIRANO in its series CIRANO Working Papers with number 2016s-60.

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Length: 41 pages
Date of creation: 21 Dec 2016
Handle: RePEc:cir:cirwor:2016s-60
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  1. Alvarez-Cuadrado, Francisco & Van Long, Ngo, 2009. "A mixed Bentham-Rawls criterion for intergenerational equity: Theory and implications," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 154-168, September.
  2. 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.
  3. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-1144, June.
  4. Burmeister, Edwin & Hammond, P J, 1977. "Maximin Paths of Heterogeneous Capital Accumulation and the Instability of Paradoxical Steady States," Econometrica, Econometric Society, vol. 45(4), pages 853-870, May.
  5. d'Autume, Antoine & Hartwick, John M. & Schubert, Katheline, 2010. "The zero discounting and maximin optimal paths in a simple model of global warming," Mathematical Social Sciences, Elsevier, vol. 59(2), pages 193-207, March.
  6. Graciela Chichilnisky, 1996. "An axiomatic approach to sustainable development," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 13(2), pages 231-257, April.
  7. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 3-28.
  8. 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.
  9. Deb, Rajat, 1994. "Waiver, Effectivity and Rights as Game Forms," Economica, London School of Economics and Political Science, vol. 61(242), pages 167-178, May.
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