Mertens, Jean-François
[UCL]
Rubinchik, Anna
[University of Haifa]
For two independent principles of intergenerational equity, the implied discount rate equals the growth rate of real per capita income, say, 2%, thus falling right into the range suggested by the U.S. Office of Management and Budget. To prove this, we develop a simple tool to evaluate small policy changes affecting several generations, by reducing the dynamic problem to a static one. A necessary condition is time invariance, which is satisfied by any common solution concept in an onverlapping-generations model with exogenous growth. This tool is applied to derive the discount rate for cost-benefit analysis under two different utilitarian welfare functions: classical and relative. It is only with relative utilitarianism, and assuming time-invariance of the set of alternatives (policies), that the discount rate is well defined for a heterogeneous society at a balanced growth equilibrium, is corroborated by an independent principle equating values of human lives, and equals the growth rate of real per-capita income.
- Arrow Kenneth J, Global Climate Change: A Challenge to Policy, 10.2202/1553-3832.1270
- Arrow, Public Investment, the Rate of Return, and Optimal Fiscal Policy (1970)
- Asheim Geir B, Unjust intergenerational allocations, 10.1016/0022-0531(91)90127-p
- Basu Kaushik, Mitra Tapan, Aggregating Infinite Utility Streams with InterGenerational Equity: The Impossibility of Being Paretian, 10.1111/1468-0262.00458
- Chichilnisky Graciela, An axiomatic approach to sustainable development, 10.1007/bf00183353
- Crespo Juan Alfonso, Nuñez Carmelo, Rincón-Zapatero Juan Pablo, On the impossibility of representing infinite utility streams, 10.1007/s00199-008-0364-6
- Dasgupta Partha, Discounting climate change, 10.1007/s11166-008-9049-6
- d’Aspremont Claude, Formal Welfarism and Intergenerational Equity, Intergenerational Equity and Sustainability (2007) ISBN:9781349283446 p.113-130, 10.1057/9780230236769_8
- Debreu, American Economic Review, 66, 280 (1976)
- Demichelis S., Polemarchakis H. M., The determinacy of equilibrium in economies of overlapping generations, 10.1007/s00199-006-0134-2
- Dhillon Amrita, Mertens Jean-Francois, Relative Utilitarianism, 10.1111/1468-0262.00033
- Drèze, Handbook of Public Economics (1987)
- Edwards, Functional Analysis (1965)
- Cohen Alma, Einav Liran, Estimating Risk Preferences from Deductible Choice, 10.1257/aer.97.3.745
- Fleurbaey Marc, Michel Philippe, Intertemporal equity and the extension of the Ramsey criterion, 10.1016/s0304-4068(03)00054-5
- Fréchet, L'Enseignement Mathématique, 15, 390 (1913)
- Gale David, Pure exchange equilibrium of dynamic economic models, 10.1016/0022-0531(73)90041-0
- Gel'fand, Obobshennuye funkzii i deistviya nad nimi (1959)
- Gordon Russell, The Integrals of Lebesgue, Denjoy, Perron, and Henstock, ISBN:9780821838051, 10.1090/gsm/004
- Kehoe Timothy J., Levine David K., Regularity in overlapping generations exchange economies, 10.1016/0304-4068(84)90025-9
- Kelley John L., Namioka Isaac, Donoghue W. F., Lucas Kenneth R., Pettis B. J., Poulsen Ebbe Thue, Price G. Baley, Robertson Wendy, Scott W. R., Smith Kennan T., Linear Topological Spaces, ISBN:9783662417683, 10.1007/978-3-662-41914-4
- King Robert G., Plosser Charles I., Rebelo Sergio T., 10.1023/a:1020529028761
- Koopmans Tjalling C., Stationary Ordinal Utility and Impatience, 10.2307/1907722
- Kotlikoff, Handbook of Public Economics, 1873 (2002)
- Mishan E. J., Evaluation of Life and Limb: A Theoretical Approach, 10.1086/259784
- Ramsey F. P., A Mathematical Theory of Saving, 10.2307/2224098
- Samuelson Paul A., An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money, 10.1086/258100
- Schwartz, Théorie des distributions (1957)
- Sidgwick, The Methods of Ethics (1874)
Bibliographic reference |
Mertens, Jean-François ; Rubinchik, Anna. Intergenerational equity and the discount rate for policy analysis. In: Macroeconomic Dynamics, Vol. 16, no.1, p. 61-93 (2012) |
Permanent URL |
http://hdl.handle.net/2078/115068 |