October 4, 2010

Justifying Social Discounting: The Rank-Discounted Utilitarian Approach

by Stéphane Zuber and Geir B. Asheim

- The discounted utilitarian criterion for infinite horizon social choice has been criticized for treating generations unequally. We propose an extended rank-discounted utilitarian (ERDU) criterion instead. The criterion amounts to discounted utilitarianism on non-decreasing streams, but it treats all generations impartially: discounting becomes the mere expression of intergenerational inequality aversion. We show that more inequality averse ERDU societies have higher social discount rates when future generations are better-off.

Zuber, S. and G.B. Asheim (2010). "Justifying Social Discounting: The Rank-Discounted Utilitarian Approach." CESifo Working Paper No. 3192, Sept 2010.