Sustainability, Limited Substitutability and Non-Constant Social Discount Rates

Christian Traeger
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Christian Traeger: University of California, Berkeley

No 1045, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: The paper explores the consequences of limited substitutability in welfare between environmental and produced goods for long-term evaluation. I show how the magnitude and time development of optimal social discount rates depend on the substitutability between the different classes of goods. The notions of weak and strong sustainability are translated into the degree of substitutability. I show that a strong notion of sustainability results in lower weights given to long-run service and consumption streams compared to a weak notion of sustainability.

Keywords: environmental discount rate; hyperbolic; limited substitutability; non-constant discounting; numeraire dependence; project evaluation; propagator of marginal utility; social discount factor; social discount rate; strong sustainability; time preference; weak sustainability (search for similar items in EconPapers)
Date: 2007-07-01
Note: oai:cdlib1:are_ucb-1176
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