Combining rights and welfarism: a new approach to intertemporal evaluation of social alternatives

We propose a new criterion reflecting both the concern for rights and the concern for welfare in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds corresponding to floors or ceilings on various quantitative indicators. The resulting constraints on actions and on levels of state variables are interpreted as minimal rights to be guaranteed to all generations, for intergenerational equity purposes. The level of these rights are endogenously chosen, accounting for the “cost in terms of welfare” of granting them. Such a criterion could embody the idea of sustainable development. We provide an axiomatization of such a criterion and characterize the tension between rights and welfare in a general economic framework. We apply the criterion to the standard Dasgupta–Heal–Solow model of resource extraction and capital accumulation. We show that if the weight given to rights in the criterion is sufficiently high, the optimal solution is on the threshold possibility frontier. The development path is then “driven” by the rights. In particular, if a minimal consumption is considered as a right, constant consumption can be optimal even with a positive utility discount rate. In this case, the shadow value of the right plays an important role in the determination of the rate of discount to be applied to social investment projects.

[1]  N. Long,et al.  Série Scientifique Scientific Series 2007 s-08 A Mixed Bentham-Rawls Criterion for Intergenerational Equity , 2007 .

[2]  Tapan Mitra,et al.  Intergenerational Equity and Efficient Allocation of Exhaustible Resources , 1983 .

[3]  B. Peleg.  Effectivity functions, game forms, games, and rights , 1997 .

[4]  Amartya Sen.  SOCIAL WELFARE FUNCTIONS , 1970 .

[5]  I. Ekeland,et al.  Resource conservation across generations in a Ramsey–Chichilnisky model , 2016, Economic Theory.

[6]  N. Long,et al.  Maximin: a direct approach to sustainability , 2006, Environment and Development Economics.

[7]  N. Long.  Toward a Theory of a Just Savings Principle , 2007 .

[8]  Luc Lauwers,et al.  Continuity and equity with infinite horizons , 1997 .

[9]  Amartya Sen,et al.  Liberty, Unanimity and Rights , 1976 .

[10]  L. Lauwers.  Rawlsian equity and generalised utilitarianism with an infinite population , 1997 .

[11]  Stephen Nickell,et al.  On the Role of Expectations in the Pure Theory of Investment Review of Economic Studies , 1974 .

[12]  R. Nozick.  Anarchy, State, and Utopia , 1975, Princeton Readings in Political Thought.

[13]  E. Neumayer.  Weak Versus Strong Sustainability: Exploring The Limits Of Two Opposing Paradigms , 2010 .

[14]  P. Dasgupta,et al.  Economic Theory and Exhaustible Resources. , 1980 .

[15]  Rajat Deb,et al.  Waiver, Effectivity and Rights as Game Forms , 1994 .

[16]  Graciela Chichilnisky.  An axiomatic approach to sustainable development , 1996 .

[17]  Constant utility paths and irreversible global warming , 1998 .

[18]  G. Heal,et al.  Valuing the future : economic theory and sustainability , 1998 .

[19]  R. Tol.  Climate policy with Bentham-Rawls preferences , 2013 .

[20]  John M. Hartwick,et al.  The zero discounting and maximin optimal paths in a simple model of global warming , 2010, Math. Soc. Sci..

[21]  Kotaro Suzumura,et al.  An interview with Paul Samuelson: welfare economics, “old” and “new”, and social choice theory , 2005, Soc. Choice Welf..

[22]  Ngo Van Long,et al.  Optimal control theory and static optimization in economics: Bibliography , 1992 .

[23]  P. Pattanaik,et al.  Individual Rights Revisited , 1992 .

[24]  Graciela Chichilnisky,et al.  The Green Golden Rule , 1995 .

[25]  Partha Dasgupta,et al.  Economic Theory and Exhaustible Resources: THE OPTIMAL DEPLETION OF EXHAUSTIBLE RESOURCES , 1980 .

[26]  P. Hammond,et al.  Maximin Paths of Heterogeneous Capital Accumulation and the Instability of Paradoxical Steady States , 1977 .

[27]  Luc Lauwers,et al.  Intertemporal objective functions: Strong pareto versus anonymity , 1998 .

[28]  Eva Schaper,et al.  Kant's Political Writings , 1970 .

[29]  P. Gärdenfors.  Rights, Games and Social Choice , 1981 .

[30]  N. Long.  A dynamic game of environmental exploitation between two countries with sequential maximin objectives , 2011 .

[31]  T. Koopmans.  Stationary Ordinal Utility and Impatience , 1960 .

[32]  Geir B. Asheim,et al.  A complete and strongly anonymous leximin relation on infinite streams , 2013, Soc. Choice Welf..

[33]  A. Sen,et al.  The Impossibility of a Paretian Liberal , 1970, Journal of Political Economy.

[34]  C. Withagen,et al.  THE OPTIMAL DEPLETION OF EXHAUSTIBLE RESOURCES: A COMPLETE CHARACTERIZATION , 2011 .

[35]  Mabel Tidball,et al.  The MBR intertemporal choice criterion and Rawls' just savings principle , 2017, Math. Soc. Sci..

[36]  Leeat Yariv,et al.  Collective Dynamic Choice: The Necessity of Time Inconsistency , 2014 .

[37]  V. Martinet.  A characterization of sustainability with indicators , 2011 .

[38]  A. Sen,et al.  Collective Choice and Social Welfare , 2017 .

[39]  Robert Sugden,et al.  Liberty, Preference, and Choice , 1985, Economics and Philosophy.

[40]  Bård Harstad,et al.  Buy Coal! A Case for Supply-Side Environmental Policy , 2012, Journal of Political Economy.

[41]  Luc Doyen,et al.  Sustainability of an economy with an exhaustible resource: A viable control approach , 2007 .

[42]  V. Martinet.  Economic Theory and Sustainable Development: What Can We Preserve for Future Generations? , 2012 .

[43]  Mabel Tidball,et al.  Ordering the Extraction of Polluting Nonrenewable Resources , 2008 .

[44]  Richard B. Howarth,et al.  Sustainability under Uncertainty: A Deontological Approach , 1995 .

[45]  Peter J. Hammond,et al.  Game Forms versus Social Choice Rules as Models of Rights , 1996 .

[46]  P. Hammond.  Social Choice of Individual and Group Rights , 1995 .