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Title:Combining rights and welfarism: A new approach to intertemporal evaluation of social alternatives PDF Logo
Authors:Long, Ngo Van
Martinet, Vincent
Issue Date:2012
Series/Report no.:CESifo working paper: Resource and Environment Economics 3746
Abstract:We propose a new criterion which reflects both the concern for welfare (utility) and the concern for rights in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds (floors or ceilings on various quantitative indicators) that serve as constraints on actions and on levels of state variables. These thresholds are interpreted as minimal rights to be guaranteed to all generations. They are endogenously chosen within the set of all feasible thresholds, accounting for the cost in terms of welfare of achieving these rights. We apply the criterion to several examples, including 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 may be 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. The shadow prices of thresholds play an important role in the determination of the rate of discount to be applied to social investment projects.
Subjects:rights
intergenerational equity
welfare
sustainability
JEL:D63
H43
Q01
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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