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Justifying social discounting: the rank-discounted utilitarian approach

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  • ZUBER, Stéphane

    (Université catholique de Louvain, CORE and Chair Lhoist Berghmans in Environmental Economics, B-1348 Louvain-la-Neuve, Belgium)

Abstract

The popular discounted utilitarian criterion for infinite horizon social choice has been criticized on the ground that it treats successive generations unfairly. I propose to evaluate intergenerational welfare with a rank- discounted utilitarian (RDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing paths, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. I show that more inequality averse RDU societies have higher social discount rates when future generations are better-off. I apply the RDU approach in two benchmark economic growth models and I prove that it promotes sustainable policies maximizing discounted utility.

Suggested Citation

  • ZUBER, Stéphane, 2010. "Justifying social discounting: the rank-discounted utilitarian approach," LIDAM Discussion Papers CORE 2010036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2010036
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    More about this item

    Keywords

    intergenerational equity; social discounting; discounted utilitarianism; sustainability;
    All these keywords.

    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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