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Discounting and altruism to future decision-makers


Sáez-Martí, María; Weibull, Jörgen W (2005). Discounting and altruism to future decision-makers. Journal of Economic Theory, 122(2):254-266.

Abstract

Is discounting of future decision-makers’ consumption utilities consistent with "pure" altruism toward those decision-makers, that is, a concern that they are better off according to their own, likewise forward-looking, preferences? It turns out that the answer is positive for many but not all discount functions used in the economics literature. In particular, "hyperbolic" discounting of the form used by Phelps and Pollak (1968) and Laibson (1997) is consistent with exponential altruism towards all future generations. More generally, we establish a one-to-one relationship between discount functions and altruism weight systems, and provide sufficient, as well as necessary, conditions for discount functions to be consistent with pure altruism.

Abstract

Is discounting of future decision-makers’ consumption utilities consistent with "pure" altruism toward those decision-makers, that is, a concern that they are better off according to their own, likewise forward-looking, preferences? It turns out that the answer is positive for many but not all discount functions used in the economics literature. In particular, "hyperbolic" discounting of the form used by Phelps and Pollak (1968) and Laibson (1997) is consistent with exponential altruism towards all future generations. More generally, we establish a one-to-one relationship between discount functions and altruism weight systems, and provide sufficient, as well as necessary, conditions for discount functions to be consistent with pure altruism.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Altruism, discounting, time preferences.
Language:English
Date:June 2005
Deposited On:11 Feb 2008 12:29
Last Modified:21 Nov 2017 13:25
Publisher:Elsevier
ISSN:0022-0531
Publisher DOI:https://doi.org/10.1016/j.jet.2004.06.003

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