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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," CORE Discussion Papers 2010036, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2010036
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    Cited by:

    1. Asheim, Geir B. & Zuber, Stéphane, 2016. "Evaluating intergenerational risks," Journal of Mathematical Economics, Elsevier, pages 104-117.
    2. Figuières, Charles & Long, Ngo Van & Tidball, Mabel, 2017. "The MBR intertemporal choice criterion and Rawls’ just savings principle," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 11-22.
    3. Alcantud, José Carlos R., 2013. "Fuzzy sets from the ethics of social preferences," MPRA Paper 53549, University Library of Munich, Germany.
    4. Asheim, Geir B. & Zuber, Stéphane, 2014. "Escaping the repugnant conclusion: rank-discounted utilitarianism with variable population," Theoretical Economics, Econometric Society, vol. 9(3), September.
    5. 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, pages 819-834.
    6. 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.
    7. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, pages 295-305.
    8. Castellano, Rosella & Cerqueti, Roy & Spinesi, Luca, 2016. "Sustainable management of fossil fuels: A dynamic stochastic optimization approach with jump-diffusion," European Journal of Operational Research, Elsevier, vol. 255(1), pages 288-297.
    9. 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.
    10. 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), pages 611-639.
    11. Gajdos, Thibault & Weymark, John A., 2012. "Introduction to inequality and risk," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1313-1330.
    12. Gerlagh, Reyer, 2017. "Generous Sustainability," Ecological Economics, Elsevier, vol. 136(C), pages 94-100.
    13. Moxnes, Erling, 2014. "Discounting, climate and sustainability," Ecological Economics, Elsevier, vol. 102(C), pages 158-166.
    14. Hultkrantz, Lars & A. Krüger, Niclas & Mantalos, Panagiotis, 2014. "Risk-adjusted long-term social rates of discount for transportation infrastructure investment," Research in Transportation Economics, Elsevier, vol. 47(C), pages 70-81.
    15. repec:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-016-0977-9 is not listed on IDEAS
    16. Christine Carmody, 2012. "Considering future generations - sustainability in theory and practice," Economic Roundup, The Treasury, Australian Government, issue 3, pages 65-91, October.
    17. Geir B. Asheim & Stéphane Zuber, 2014. "Probability Adjusted Rank-Discounted Utilitarianism," CESifo Working Paper Series 4728, CESifo Group Munich.
    18. Tol, Richard S.J., 2013. "Climate policy with Bentham–Rawls preferences," Economics Letters, Elsevier, vol. 118(3), pages 424-428.
    19. Tol, Richard S.J., 2013. "Targets for global climate policy: An overview," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 911-928.
    20. Asheim, Geir B. & Zuber, Stéphane, 2015. "Evaluating Intergenerational Risks: Probabillity Adjusted Rank-Discounted Utilitarianism," Memorandum 06/2015, Oslo University, Department of Economics.
    21. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, risk and inequality: A general approach," Journal of Public Economics, Elsevier, vol. 128(C), pages 34-49.
    22. Geir B. Asheim & Frikk Nesje, 2016. "Destructive Intergenerational Altruism," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 957-984.
    23. Geir B. Asheim, 2017. "Sustainable growth," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 825-848, December.
    24. 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.

    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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