Sustainable preferences via nondiscounted, hyperreal intergenerational welfare functions

Marcus Pivato

MPRA Paper from University Library of Munich, Germany

Abstract: We define an intergenerational social welfare function Sigma from |R^|N (the set of all infinite-horizon utility streams) into *|R (the ordered field of hyperreal numbers). The function Sigma is continuous, linear, and increasing, and is well-defined even on unbounded (e.g. exponentially increasing) utility streams. This yields a complete social welfare ordering on |R^|N which is Pareto and treats all generations equally (i.e. does not discount future utility). In particular, it is what Chichilnisky (1996) calls a `sustainable' preference ordering: it is neither a `dictatorship of the present' nor a `dictatorship of the future'. We then show how an agent with no `pure' time preferences may still `informationally discount' the future, due to uncertainty. Last, we model intergenerational choice for an exponentially growing economy and population. In one parameter regime, our model shows `instrumental discounting' due to declining marginal utility of wealth. In another regime, we see a disturbing `Paradox of Eternal Deferral'.

Keywords: intergenerational choice; intertemporal choice; infinite-horizon; nondiscounted; sustainable; hyperreal; nonstandard real numbers; nonstandard analysis (search for similar items in EconPapers)
JEL-codes: D71 D90 Q01 (search for similar items in EconPapers)
Date: 2008-03-05
New Economics Papers: this item is included in nep-upt
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