Fundamental utilitarianism and intergenerational equity with extinction discounting

Chichilnisky, Graciela, Hammond, Peter J. and Stern, Nicholas (2020) Fundamental utilitarianism and intergenerational equity with extinction discounting. Social Choice and Welfare, 54 (2-3). pp. 397-427. ISSN 0176-1714

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Abstract

Ramsey famously condemned discounting “future enjoyments” as “ethically indefensible”. Suppes enunciated an equity criterion which, when social choice is utilitarian, implies giving equal weight to all individuals’ utilities. By contrast, Arrow (Contemporary economic issues. International Economic Association Series. Palgrave Macmillan, London, 1999a; Discounting and Intergenerational Effects, Resources for the Future Press, Washington DC, 1999b) accepted, perhaps reluctantly, what he called Koopmans’ (Econometrica 28(2):287–309, 1960) “strong argument” implying that no equitable preference ordering exists for a sufficiently unrestricted domain of infinite utility streams. Here we derive an equitable utilitarian objective for a finite population based on a version of the Vickrey–Harsanyi original position, where there is an equal probability of becoming each person. For a potentially infinite population facing an exogenous stochastic process of extinction, an equitable extinction biased original position requires equal conditional probabilities, given that the individual’s generation survives the extinction process. Such a position is well-defined if and only if survival probabilities decline fast enough for the expected total number of individuals who can ever live to be finite. Then, provided that each individual’s utility is bounded both above and below, maximizing expected “extinction discounted” total utility—as advocated, inter alia, by the Stern Review on climate change—provides a coherent and dynamically consistent equitable objective, even when the population size of each generation can be chosen.

Item Type:	Article
Official URL:	https://link.springer.com/journal/355
Additional Information:	© 2020 The Author
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Date Deposited:	06 Feb 2020 11:36
Last Modified:	18 Mar 2024 03:54
URI:	http://eprints.lse.ac.uk/id/eprint/103307

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