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Social Discounting and Intergenerational Pareto
Author(s) -
Feng Tangren,
Ke Shaowei
Publication year - 2018
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta15011
Subject(s) - discounting , pareto principle , economics , pareto optimal , econometrics , delay discounting , mathematical economics , mathematics , operations management , multi objective optimization , mathematical optimization , finance
The most critical issue in evaluating policies and projects that affect generations of individuals is the choice of social discount rate. This paper shows that there exist social discount rates such that the planner can simultaneously be (i) an exponential discounting expected utility maximizer; (ii) intergenerationally Pareto—that is, if all individuals from all generations prefer one policy/project to another, the planner agrees; and (iii) strongly non‐dictatorial—that is, no individual from any generation is ignored. Moreover, to satisfy (i)–(iii), if the time horizon is long enough, it is generically sufficient and necessary for social discounting to be more patient than the most patient individual's long‐run discounting, independent of the social risk attitude.