Environmental and Resource Economics

, Volume 48, Issue 3, pp 363–390

The Ethics of Intertemporal Distribution in a Warming Planet

Authors

Article

DOI: 10.1007/s10640-010-9414-1

Cite this article as:
Roemer, J.E. Environ Resource Econ (2011) 48: 363. doi:10.1007/s10640-010-9414-1

Abstract

This paper evaluates, from the ethical viewpoint, current work by economists on intergenerational resource allocation in the presence of global warming. We begin by attempting to elucidate the debate that has recently occurred on the appropriate choice of the discount rate. We offer three justifications for maximizing the discounted sum of generational utilities, and find only one of these to be a satisfactory justification of that practice: the possibility that the human species may become extinct. This implies that a very small discount rate (large discount factor) should be used. We argue that the justification for discounting, inherent in the approaches taken by many economists, is that of ‘the present generation of hegemon,’ which is unacceptable. The role of the Ramsey equation in deducing the discount rate in these theories is explained. As an alternative to discounted utilitarianism, we propose a principle of sustainability; we describe optimal paths that have been calculated for the sustainabilitiarian (Rawlsian) objective function, and paths that will sustain growth in welfare, at a positive rate. We report results concerning optimal paths when the uncertainty of existence of future generations is taken into account. In sharp contrast to the utilitarian model, it turns out that under some conditions, the ‘sustainabilitarian’ can ignore the uncertainty regarding the date at which humans become extinct. There is a striking difference between the solutions of the discounted utilitarian program and the sustainabilitarian program under uncertainty.

Keywords

Climate changeGlobal warmingIntertemporal optimizationSocial discount rateDiscounted utilitarianismRawlsian justiceSustainability

JEL Codes

D63D90H43
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© Springer Science+Business Media B.V. 2010