Sustainable preferences via nondiscounted, hyperreal intergenerational welfare functions

Pivato, Marcus (2008): Sustainable preferences via nondiscounted, hyperreal intergenerational welfare functions.

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'.

• Item Type: MPRA Paper
• Language: English
• Keywords: intergenerational choice; intertemporal choice; infinite-horizon; nondiscounted; sustainable; hyperreal; nonstandard real numbers; nonstandard analysis
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice ; Clubs ; Committees ; Associations; D - Microeconomics > D9 - Intertemporal Choice > D90 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development

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