Environmental and Resource Economics

, Volume 48, Issue 3, pp 363–390

The Ethics of Intertemporal Distribution in a Warming Planet

Article

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 change Global warming Intertemporal optimization Social discount rate Discounted utilitarianism Rawlsian justice Sustainability 

JEL Codes

D63 D90 H43 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Arrow K (1973) Rawls’s principle of just savings. Swedish J Econ 75: 323–335CrossRefGoogle Scholar
  2. Asheim G, Buchholz W, Tungodden B (2001) Justifying sustainability. J Environ Econ Manag 41: 252–268CrossRefGoogle Scholar
  3. Asheim G, Tungodden B (2004) Resolving distributional conflicts between generations. Econ Theory 24: 221–230CrossRefGoogle Scholar
  4. Basu K, Mitra T (2003) Aggregating infinite utility streams with intergenerational equity: the impossibility of being Paretian. Econometrica 71: 1557–1563CrossRefGoogle Scholar
  5. Basu K, Mitra T (2007) Utilitarianism for infinite utility streams: a new welfare criterion and its axiomatic characterization. J Econ Theory 133: 350–373CrossRefGoogle Scholar
  6. Buchholz W (1997) Intergenerational equity. In: Zylicz T (ed) Ecological economics. Uppsala University Press, UppsalaGoogle Scholar
  7. Dasgupta P (1974) On some alternative criteria for justice between generations. J Public Econ 3: 415–423CrossRefGoogle Scholar
  8. Dasgupta P (2005) Three conceptions of intergenerational justice. In: Lillehammer H, Mellor DH (eds) Ramsey’s legacy. Clarendon Press, OxfordGoogle Scholar
  9. Dasgupta P (2008) Discounting climate change. J Risk Uncertain 37: 141–169CrossRefGoogle Scholar
  10. Diamond P (1965) The evaluation of infinite utility streams. Econometrica 33: 170–177CrossRefGoogle Scholar
  11. Intergovernmental Panel on Climate Change: (2008) Climate change 2007: the physical science basis. Cambridge University Press, CambridgeGoogle Scholar
  12. Koopmans T (1960) Stationary ordinal utility and impatience. Econometrica 28: 287–309CrossRefGoogle Scholar
  13. Llavador H, Roemer J, Silvestre J (2008) [LRSa] A dynamic analysis of human welfare in a warming planet. http://pantheon.yale.edu/~jer39/climatechange.html
  14. Llavador, H, Roemer J, Silvestre J (in press) [LRSb] intergenerational justice when the existence of future generations is uncertain. J Math EconGoogle Scholar
  15. Matthews HD, Caldeira K (2008) Stabilizing climate requires near-zero emissions. Geophys Res Lett 35: L04705. doi:10.1029/2007GL032388 CrossRefGoogle Scholar
  16. Neumayer E (2003) Weak versus strong sustainability: exploring the limits of two opposing paradigms. Elgar, CheltenhamGoogle Scholar
  17. Nordhaus W (2008) A question of balance. Yale University Press, New HavenGoogle Scholar
  18. Nordhaus W (2007) A review of the stern review on the economics of climate change. J Econ Lit 45: 686–702CrossRefGoogle Scholar
  19. Ramsey F (1928) A mathematical theory of saving. Econ J 38: 543–559CrossRefGoogle Scholar
  20. Roemer J (1996) Theories of distributive justice. Harvard University Press, CambridgeGoogle Scholar
  21. Roemer, J, Suzumura, K (eds) (2007) Intergenerational equity and sustainability. Macmillan, LondonGoogle Scholar
  22. Silvestre J (2002) Progress and conservation under Rawls’ maximin principle. Soc Choice Welfare 19: 1–27CrossRefGoogle Scholar
  23. Solow R (1974) Intergenerational equity and exhaustible resources. Rev Econ Stud (Symposium) 3–28Google Scholar
  24. Stern N (2007) The stern review on the economics of climate change. Cambridge University Press, CambridgeGoogle Scholar
  25. Stern N (2008) The economics of climate change. Am Econ Rev Pap Proc 98: 21–37Google Scholar
  26. Weitzman M (2007) A review of the stern review on the economics of climate change. J Econ Lit 45: 703–724CrossRefGoogle Scholar
  27. Weitzman M (2008) On modeling and interpreting the economics of catastrophic climate change. Rev Econ Stat (forthcoming)Google Scholar
  28. Withagen C, Asheim G (1998) Characterizing sustainability: the converse of Hartwick’s rule. J Econ Dyn Control 23: 159–165CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Yale UniversityNew HavenUSA

Personalised recommendations