How stationarity contradicts intergenerational equity
- PDF / 405,349 Bytes
- 22 Pages / 439.37 x 666.142 pts Page_size
- 8 Downloads / 212 Views
How stationarity contradicts intergenerational equity Geir B. Asheim1
· Kuntal Banerjee2 · Tapan Mitra3
Received: 7 April 2020 / Accepted: 8 July 2020 © The Author(s) 2020
Abstract We show how the condition of stationarity may contradict intergenerational equity. By formalizing the intuition that less sensitivity remains for the continuation of the stream if sensitivity for the interests of the present is combined with stationarity, we point out conflicts (a) between stationarity and the requirement of not letting the present be dictatorial, and (b) between stationarity and equal treatment of generations. We use the results to interpret the non-stationarity of the Chichilnisky and Rankdiscounted utilitarian social welfare functions. Non-stationarity combined with time invariance leads to time inconsistency. We illustrate how such non-stationary social welfare functions can be applied in the Ramsey model if time invariance is imposed. Keywords Intergenerational equity · Stationarity · Time inconsistency JEL Classification D63 · D71 · Q01
Tapan Mitra passed away on 3 February 2019. Through his work he seamlessly combined authority and grace. He remains a valuable source of inspiration to his co-authors. We thank two anonymous referees, Walter Bossert, Claude d’Aspremont, Marc Fleurbaey, Sean Horan, Adam Jonsson, Paolo Piacquadio, and other seminar participants in Lund, Marseille, Montréal, Oslo, Taipei, Tokyo, and Tucson for helpful comments. This paper is part of the research activities at the Centre for the Study of Equality, Social Organization, and Performance (ESOP) at the Department of Economics at the University of Oslo. Asheim’s research has benefitted from stays at IMéRA–Marseille, CIREQ–Montréal, and Paris School of Economics. An earlier version of this paper was circulated under the title “The necessity of time inconsistency for intergenerational equity”.
B
Geir B. Asheim [email protected] Kuntal Banerjee [email protected] Tapan Mitra [email protected]
1
Department of Economics, University of Oslo, P.O. Box 1095, Blindern 0317, Oslo, Norway
2
Department of Economics, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431, USA
3
Department of Economics, Cornell University, 448 Uris Hall, Ithaca, NY 14853, USA
123
G. B. Asheim et al.
1 Introduction Intergenerational equity is often studied in a context where the time horizon is infinite. This modeling choice captures that there is a large number of future potential people by distributing them over a countably infinite number of generations. If we assume that the wellbeing of each of these generations can be measured by a level-comparable index, then the question of intergenerational equity corresponds to the problem of ranking such infinite wellbeing streams by means of a social welfare relation. Following Koopmans (1960, Section 6), a social welfare relation satisfies the property of stationarity if for any two streams with the same present wellbeing, the social preference between these stream is not changed if the timing of t
Data Loading...
