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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: Dept. of Economics, and Grantham Research Institute on Climate Change and the Environment, LSE

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

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 satisfied. In fact, assuming that the expected total number of individuals who ever live is finite, 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.

JEL-codes: D63 D70 D90 Q54 Q56 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dem, nep-hpe, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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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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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1174

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