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Justifying social discounting: the rank-discounted utilitarian approach

  • ZUBER, Stéphane

    ()

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

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.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010036.

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Date of creation: 01 Jul 2010
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Handle: RePEc:cor:louvco:2010036
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