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The Apple Tree

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  • Ahmed Anwar

Abstract

Consider an individual whose preferences are changing over time. How do we assess her welfare? We argue that this is an empirically relevant question as preferences are constantly changing over time if the agent has a bias towards the present. We present a simple example where preferences are changing over time (the apple tree) and use it to aid our discussion of welfare. We critically assess the approach that focuses on the decision maker (revealed preference) and the one that ignores the decision maker (long-run self) with reference to some recent literature. Finally, we look at some of the problems that arise when we consider a sovereign individual who aggregates her changing preferences.

Suggested Citation

  • Ahmed Anwar, 2007. "The Apple Tree," Edinburgh School of Economics Discussion Paper Series 164, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:164
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    File URL: http://www.econ.ed.ac.uk/papers/id164_esedps.pdf
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    References listed on IDEAS

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    1. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, January.
    2. Andrew Caplin & John Leahy, 2004. "The Social Discount Rate," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1257-1268, December.
    3. Stefano Zamagni & Elettra Agliardi (ed.), 2004. "Time in Economic Theory," Books, Edward Elgar Publishing, volume 0, number 2700.
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