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Should We Discount the Welfare of Future Generations? Ramsey and Suppes versus Koopmans and Arrow

Graciela Chichilnisky (), Peter Hammond () and Nicholas Stern
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Nicholas Stern: LSE

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Ramsey famously pronounced that discounting "future enjoyments" would be ethically indefensible. Suppes enunciated an equity criterion implying that all individuals' welfare should be treated equally. By contrast, Arrow (1999a, b) accepted, perhaps rather reluctantly, the logical force of Koopmans' argument that no satisfactory preference ordering on a sufficiently unrestricted domain of infinite utility streams satisfies equal treatment. In this paper, we first derive an equitable utilitarian objective based on a version of the Vickrey-Harsanyi original position, extended to allow a variable and uncertain population with no finite bound. Following the work of Chichilnisky and others on sustainability, slightly weakening the conditions of Koopmans and co-authors allows intergenerational equity to be satis ed. In fact, assuming that the expected total number of individuals who ever live is nite, and that each individual's utility is bounded both above and below, there is a coherent equitable objective based on expected total utility. Moreover, it implies the \extinction discounting rule" advocated by, inter alia, the Stern Review on climate change.

Keywords: Discount rate; utilitarianism; consequentialization; Vickrey-Harsanyi original position; Suppes criterion; optimal population; average versus total utility; intergenerational equity; long-run discounting; sustainable preferences; extinction discounting rule JEL Classification: D63; D70; D90; Q54; Q56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dem, nep-mic and nep-upt
Date: 2018
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Working Paper: Should We Discount the Welfare of Future Generations? Ramsey and Suppes versus Koopmans and Arrow (2018) Downloads
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