Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147435
Authors: 
Asheim, Geir B.
Ekeland, Ivar
Year of Publication: 
2015
Series/Report no.: 
Memorandum, Department of Economics, University of Oslo 17/2015
Abstract: 
The Chichilnisky criterion is an explicit social welfare function that satisfies compelling conditions of intergenerational equity. However, it is time inconsistent and has no optimal solution in the Ramsey model. By investigating stationary Markov equilibria in the game that generations with Chichilnisky preferences play, this paper shows how nevertheless this criterion can be practically implemented in the Ramsey model, leading to attractive consequences. The time-discounted utilitarian optimum is the unique equilibrium path with a high-productive initial stock, implying that the weight on the infinite future in the Chichilnisky criterion plays no role. However, this part of the Chichilnisky criterion may lead to more stock conservation than the time-discounted utilitarian optimum with a low-productive initial stock. Based on the notion of von Neumann-Morgenstern abstract stability, we obtain uniqueness by assuming that each generation coordinates on an almost best equilibrium and takes into account that future generations will do as well.
Subjects: 
Intertemporal decision making
Time inconsistency
Intergenerational equity
JEL: 
C70
D63
D91
O41
Q01
Document Type: 
Working Paper

Files in This Item:
File
Size
581.89 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.