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Intergenerational Justice when Future Worlds Are Uncertain

Suppose that there exists a positive (exogenous) probability that at each date of a possibly infinite future, the human species will disappear. We postulate an Ethical Observer (EO) who must solve an intertemporal welfare maximization problem under this kind of uncertainty, with preferences that satisfy the expected utility hypothesis. Various social welfare criteria are expressed as alternative von Neumann-Morgenstern utility functions for the EO: utilitarianism, Rawlsianism, and an extension of the latter that corrects for the size of population. Our analysis covers, first, a simple cake-eating economy, where the utilitarian and Rawlsian recommend the same intergenerational allocation. Second, we consider a productive economy with education and capital. There, however, the recommendations of the two Ethical Observers are in general (but not always) different. Surprisingly, when the utilitarian optimization program diverges, then it is optimal for the extended Rawlsian to ignore the uncertainty concerning the possible disappearance of the human species in the future. We conclude with some thoughts about what these results imply for the issue of intergenerational welfare maximization in the presence of global warming.

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File URL: http://cowles.econ.yale.edu/P/cd/d16b/d1692.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1692.

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Length: 48 pages
Date of creation: Apr 2009
Date of revision:
Publication status: Published in Journal of Mathematical Economics (2010) 46(5): 728-761
Handle: RePEc:cwl:cwldpp:1692
Note: CFP 1324.
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2009. "A Dynamic Analysis of Human Welfare in a Warming Planet," Cowles Foundation Discussion Papers 1673R, Cowles Foundation for Research in Economics, Yale University.
  2. Phelps, Edmund S & Riley, J G, 1978. "Rawlsian Growth: Dynamic Programming of Capital and Wealth for Intergeneration "Maximin" Justice," Review of Economic Studies, Wiley Blackwell, vol. 45(1), pages 103-20, February.
  3. Basu, Kaushik & Mitra, Tapan, 2007. "Utilitarianism for infinite utility streams: A new welfare criterion and its axiomatic characterization," Journal of Economic Theory, Elsevier, vol. 133(1), pages 350-373, March.
  4. Dasgupta, Partha, 1974. "On some alternative criteria for justice between generations," Journal of Public Economics, Elsevier, vol. 3(4), pages 405-423, November.
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