Home > Economics - General > “Future generations” are already here

“Future generations” are already here

April 22nd, 2012

The Journal of Public Economic Theory has a special issue on Managing Climate Change, to which they are providing free access (hopefully, this link will work). I’m mentioning it partly because I have an article which I think is really important, even though the point it makes is a simple one, and partly because any initiative to make important information more freely available (even a limite special case like this one) deserves some applause.

My paper is a bit wonkish, but the basic point is simple, and, I think provides a knockdown argument against any form of utilitarianism that discounts future utility (including those misleadingly referred to as future generations.

The paper gives a mathematical demonstration, but the key idea, stated in the introduction is a simple one

Much of the debate on the question of whether a pure rate of time preference can be justified is concerned with determining the appropriate way to balance the interests of “current” and “future” generations. The central question, in this framing of the problem, is whether, and to what extent, members of the current generation have the right to allocate resources in their own favour, at the expense of unborn future generations.

The central point of this note is to observe that this way of posing the problem is invalid, because members of different generations are alive at the same time. Any policy that discounts future utility must discriminate not merely against generations yet unborn but against the current younger generation. Assuming that members of any given generation are concerned about their own lifetime utility, rather than myopically concerned with current utility alone, a social allocation rule that incorporates pure time preference gives higher weight to the lifetime utility of earlier born generations than to their later born contemporaries. Assuming a 3% pure rate of time preference, as above, and 25 years between generations, the lifetime welfare of those aged 50 or more is valued twice as highly as the welfare of their children, and four times as highly as the welfare of their grandchildren, all of whom may be alive at the same time. This is obviously inconsistent with any form of utilitarianism in which all those currently alive are valued equally.

Furthermore, by the nature of overlapping generations, there is no point at which a coherent distinction between current and future generations can be drawn. In the absence of some general catastrophe, many children alive today will still be alive in 2100, at which time people already alive will reasonably be able to anticipate the possibility of survival well into the 22nd century.

Posted via email from John’s posterous

Categories: Economics - General Tags:
  1. Fran Barlow
    April 22nd, 2012 at 21:43 | #1

    The reasoning here is entirely sound, and in broad terms, it’s an argument I’ve made in a number of places (though without putting a number on it)

    The curious thing is that if one were to try weighting the utitlity of different lives, one could argue for weighting the young more heavily than the old. After all, I’m 53 — I probably won’t live much more than a further 30 years — 40 tops and for much of that time I won’t be all that productive. Hopefully, the training I’ve received and the credit I recieved as a child when unproductive and that I will receive when an unproductive senior will have been fully repaid/banked within the next 15 years or so. In marginal utility terms, if I drop off the twig at 70, society is probably ahead.

    That’s not my view of course. Yet if I were being strictly utilitarian and I look at the quality life years left to me, the number is much smaller than for someone of, say 15 years old — and there’s a massive social sunk cost in that child. If he or she is harmed now, the costs of that are huge compared to me.

    What’s more, in terms of climate change, I’m unlikely to live long enough to see the worst of it. Whether people now act effectively or not, by 2050, I’ll be 92 and their efforts, for good or ill, will not personally advantage or disadvantage me very much at all. The people these actions might advantage/disadvantage most will be people whose working lives will start in about 2050-60 — i.e people being born perhaps 20-30 years from now. They don’t get a say in this until it is much too late. We just have to knuckle down and make sure we don’t disadvantage them in the vain pursuit of not very much advantage at all.

  2. Ben Aveling
    April 22nd, 2012 at 21:50 | #2

    i.e Some people argue against acting on climate change because the benefits of doing so are in the future – i.e. they accrue to so called ‘future generations’. But in fact, many of the people who are alive now will live long enough to benefit from action now, so the reference to future generations is misleading, even wrong, and the whole ‘future generation’ argument is really an attempt to give older people more rights than younger people.

  3. Freelander
    April 22nd, 2012 at 22:15 | #3

    Rejecting the “what have they ever done for us?” approach.

  4. Freelander
    April 22nd, 2012 at 22:21 | #4

    Separate to any overlapping argument, I have never understood why the well-being of a person a century from now ought to be considered more important than one born a millennium from now.

  5. April 22nd, 2012 at 22:47 | #5

    I agree. If you have kids you should weight their utilities as you do your own so set low discount rates.There are many other reasons for doing this such as that real bond yields have been very low or negative and theory reasons – Pindyck’s use of Jensen’s inequality to show that if you are uncertain about discount rates then choose a low one,

  6. rog
    April 22nd, 2012 at 22:55 | #6

    The same argument or principle is applied with cigarette smoking and alcohol use in pregnant women and nursing mothers.

    Similarly with agricultural chemicals such as organophosphates on birth defects.

  7. rog
    April 22nd, 2012 at 23:45 | #7

    Post already picked up by DeLong and Peter Martin.

  8. Fran Barlow
    April 22nd, 2012 at 23:48 | #8

    @Freelander

    I have never understood why the well-being of a person a century from now ought to be considered more important than one born a millennium from now

    It’s not that there’s a difference in the value of their well-being. It’s that our capacity to comprehend their needs will be a fraction of our ability to comprehend the needs of people more proximate in time to us. We owe them a biosphere no worse than the one we inherited and possibly a little better, and we, along with those who follow us, can play a part in ensuring they have it. Yet compared with them, if they exist, we are likely to be mre cultural children, much as were the people born a millennium ago — and perhaps more so, since the pace of technological change has quickened greatly over the last 150 years.

    Apart from good stewardship of the biosphere and our earnest desire to shed light where there is darkness and to lay foundations for the next 50 or 100 generations of learning and human accomplishment, they would surely scoff at what we might offer them. If any such folk are reading this in 3012, or 4012 I wish them the best of circumstances, as little as I can grasp their wishes.

  9. rog
    April 22nd, 2012 at 23:49 | #9

    The idea that equality must apply to all generations born and unborn has appeal.

  10. Freelander
    April 22nd, 2012 at 23:56 | #10

    @Fran Barlow

    You should read up on the subject before instructing others or explaining where they are in error..

  11. Fran Barlow
    April 23rd, 2012 at 00:18 | #11

    @Freelander

    I assume you have no material … again and this is the best you can manage but by all means feel free to cite something I’ve overlooked and should have read up on. I prefer to think that you aren’t simply trolling. Please offer a basis for me to do so.

  12. Freelander
    April 23rd, 2012 at 00:46 | #12

    Sorry Fran, don’t have anything to prove.

    JQ very interesting paper. Should gather many citations.

    Among the reasons that individuals might have a preference for consuming while young might be that for reasons of health and, otherwise, they are better able to enjoy that consumption, as well as, the uncertainty about being around to enjoy further consumption due to an early death.

  13. Fran Barlow
    April 23rd, 2012 at 01:49 | #13

    @Freelander

    Sorry Fran, don’t have anything to prove.

    More precisely, you have no material. That is something for which to be sorry.

    It’s regrettable, but it seems that you’ve made a definite decision to go from being someone with an argued viewpoint to being a boorish and vacuous troll. I don’t care to imagine why you’d find that amusing.

    Your call obviously.

  14. Freelander
    April 23rd, 2012 at 02:07 | #14

    @Fran Barlow

    Following your confederate into self-referential statements. I am not here to provide a free education, particularly to those resistant to acquiring one.

  15. Freelander
    April 23rd, 2012 at 02:23 | #15

    Tangentially related as the papers are in an open access issue. I notice there is a big push for open access, especially of material that has been produced with taxpayer money. I think that is great, long overdue, and hope the campaign is a success.

    Given that significant dollars must be spent by a massive number of universities on numerous journals, the vast sums spent ought to be sufficient to finance the whole journal production activity with money left over. The problems stopping that would seem to be, coordination among the various universities, including dealing with the issue of splitting the total costs and avoiding free-riders, and at the periphery judging which new journals ought to be supported.

  16. alfred venison
    April 23rd, 2012 at 07:47 | #16

    nice point, Fran.
    a.v.

  17. BilB
    April 23rd, 2012 at 08:35 | #17

    If we are going to talk about generations and their relative rights, we have to register the reality that at any one time in history there is a “command” generation. This Command Generation is the group of people with the most influence on affairs both public and private. At present the generation holding the command position is the “Baby Boomer” generation. This understanding is important as it governs the civilisations reactionary flexibility. History is very much driven by the belief structure of this command generation, a belief structure that was created as this group was in its infancy. Civilisation’s ability to change is heavily influenced by the time that it takes for the command generation to go from infancy to command status. So where there is a huge difference in the infancy experiences and perceptions of one generation to the another there will be volatility with in the community/civilisation.

    Th problem we have with climate change is that the current Command Generation is attempting deny the science that the current infant and adolescent generations are fully adopting.

    Our civilisation is doomed if we have to wait the 40 years until the current infant and adolescent generations achieve generational Command Status.

  18. John Quiggin
    April 23rd, 2012 at 09:25 | #18

    Freelander, you seem to be getting into a lot of fights lately. From now, please refrain from debating other commenters, and confine yourself to making your own points. I’d ask other commenters to play fair and not criticise Freelander. If you disagree with a point Freelander has made, state your own view on the matter in question, rather than framing it as a response.

  19. Hermit
    April 23rd, 2012 at 11:05 | #19

    I think just looking at the next 20 years without discounting provides more than enough ammunition to declare that low carbon requires intervention. By low carbon I mean an amalgam of Peak Oil and climate change. The market scarcely seems to factor in probable developments 5 years from now let alone decades. We could simply extrapolate two current developments, $1.50 petrol and a very warm April. It won’t take many years before we’re talking $2.50 petrol and crops confusing spring and autumn with major cost of living implications. Yet ‘the market’ won’t acknowledge those implications until they are upon us.

    If we can get to 2030 (crunch time according to Limits to Growth theory) we must have done something right to set ourselves up for the following 20 years. Therefore I think there is little need to use discounting, just the next 20 years with a moving start date.

  20. Tom
    April 23rd, 2012 at 12:30 | #20

    @BilB

    You have a valid point, but I do not think that is fair for the “Baby Boomers” generation.

    You are correct at saying that the “Baby Boomers” generation is the “Command Generation”. However, those that are actually in commanding or powerful position are those that have quite significant financial power and self-interest. Unfortunately, there are also a lot of people from the baby boomer’s generation that wants to act in the interest of the future generations but are suppressed by those that holds power e.g. a lot of commentators in this blog including Professor Quiggin I believe.

    As for the future commanding generation, greed and vested interest will also apply. The only different being that they will most likely be alive to live the worst part of climate change. This difference is maybe the only chance the future generation have.

  21. Fran Barlow
    April 23rd, 2012 at 13:00 | #21

    PrQ said:

    I’d ask other commenters to play fair and not criticise Freelander. If you disagree with a point Freelander has made, state your own view on the matter in question, rather than framing it as a response.

    Fine with me. I will not respond to him or refer expressly to him again, or make any remark that a reasonable person ought from context to infer was made with him primarily in mind.

  22. Freelander
    April 23rd, 2012 at 14:23 | #22

    @John Quiggin

    Fair enough. Although I will make a couple of points.

    First, if I “seem to be getting into a lot of fights lately” each of that number has involved Fran on the other side, so unless there is some defence in being a member of a posse the same charge applies to her.

    Second, where I have sought to disengage or tried ‘the agree to disagree formula’ this has been met by abuse and claims of concession. And this response, likewise, where I have not being willing to provide some dissertation to back up a comment. A dissertation that would be pointless anyway given the apparent intent to misinterpret. And as you know, attempting to explain some things, in a few paragraphs, to someone who does not have the background, can be fruitless.

    Third, Fran is well-known in the blogosphere for ‘correcting’ the perceived mistakes of others, and for precipitating ‘fights’. And is not shy in her estimation (I would say over estimation) and claims of her own knowledge on diverse topics, but is resistant to see her own error when in error. (Not that we don’t all, myself included of course, have some resistance there.) Examples of her making claims to knowledge, that seem, well remarkable, are above (inter alia, “The reasoning here is entirely sound, and in broad terms, it’s an argument I’ve made in a number of places (though without putting a number on it).”). Not exactly a humble, nor, I would conjecture, a sustainable claim. Her fights on Caxallay are still the subject of much discussion on that blog. And her stoush with Jonathan Holmes, where she was busy ‘correcting’ him, managed to attract the attention of Andrew Bolt. (Incidentally, like Holmes, I don’t particularly like the way the words ‘carbon’ and ‘pollution’ are being used in the GHG debate and agree with his point that it gives succour to the other side.)

    Fran’s ‘correcting’ me here was entirely gratuitous, and involved an act of mind-reading on her part (mind-reading being something she engages in frequently) . (My mind was not read correctly.)

    Hence, I might suggest that what you say might equally apply to Fran.

    But it’s your blog, and hence you can do as you wish.

  23. John Quiggin
    April 23rd, 2012 at 14:49 | #23

    I don’t have time to keep careful track of things here, so I’m just reacting to my impression of things. But I will ask all commenters, including Fran, to refrain from pursuing lengthy debates in the main comment thread.

  24. Freelander
    April 23rd, 2012 at 15:06 | #24

    Fair enough. No problem.

    Interesting paper anyway.

    The other side of implicitly discounting the future often found in models is the assumption made of continuing growth in real gdp per capita due to a combination of capital accumulation and improvements in productivity. The extent to which the wonderful times we have enjoyed due to both sources of growth can be projected into the future is speculative (beyond bringing everyone up to current western standards), so modelling may be short-changing future generations this way as well (through the assumption that they will be so wealthy that that will compensate for a trashed environment).

  25. Alan
    April 23rd, 2012 at 18:46 | #25

    Blogs probably work best without extensive metacommentary from ppl who are asked not to engage in extensive metacommentary.

  26. Katz
    April 23rd, 2012 at 19:55 | #26

    Much of the debate on the question of whether a pure rate of time preference can be justified is concerned with determining the appropriate way to balance the interests of “current” and “future” generations. The central question, in this framing of the problem, is whether, and to what extent, members of the current generation have the right to allocate resources in their own favour, at the expense of unborn future generations.

    No algorithm can answer that question. All it can do is to enable the quantification of the cost of adopting any algorithm.

  27. gerard
    April 23rd, 2012 at 20:02 | #27

    I notice that the paper refers to Ramsey (1928) as being the “starting point” for the intertemporal utility maximizing approach.

    It might have been worthwhile to mention that Ramsey himself – on the first page of classic paper referenced – refers to the discounting of future generations’ welfare as “ethically indefensible”:

    One point should perhaps be emphasised more particularly; it is assumed that we do not discount later enjoyments in comparison with earlier ones, a practice which is ethically indefensible and arises merely from the wealiness of the imagination; we shall, however, in Section II include such a rate of discount in some of our investigations.

    It is this “Section II” of the paper that is the starting point of modern orthodoxy. Section I of the paper has a different approach; instead of maximizing the integral of time-discounted utility, Ramsey defines a certain maximum level of utility (which he calls “Bliss”) and defines the optimal path as that which minimizes the integral of the difference between utility and bliss, with no time-discounting factor!

  28. gerard
    April 23rd, 2012 at 20:09 | #28

    Doh, you did mention this in the very first paragraph! I’ll just show myself out…

  29. plaasmatron
    April 23rd, 2012 at 21:00 | #29

    There is a strong case for the elderly generation to contribute more to the upbringing of the youngest generation. Currently this is performed by grandparents babysitting for their kids, but it should be extended to retirement villages being built beside kindergartens. IMO the benefits for both groups are enormous, and for society as a whole. Not only do kids get the attention of grown ups who are not stressed by the day-to-day survival issues, but the pensioners get the feeling of contributing something positive.

    The list of symbiotic advantages goes on, but in the current context of PrQ’s article, the interaction of elderly people with comparatively large retirement benefits (as least compared to what I will ever end up seeing) with young people and their hard working parents, might encourage some thoughtful allocation of resources from the group who hold the majority of the wealth.

  30. Peter Kirsop
    April 24th, 2012 at 06:15 | #30

    The whole principle the good Prof advocates (if not his particular mathematical model) is, I am delighted to say, pure conservatism -originally espoused by Edmund Burke in his Appeal from the Old Whigs to the New.
    Welcome Prof.

  31. wilful
    April 24th, 2012 at 13:37 | #31

    Freelander :
    Separate to any overlapping argument, I have never understood why the well-being of a person a century from now ought to be considered more important than one born a millennium from now.

    The small but measurable chance of an extinction level asteroid strike.

  32. Freelander
    April 24th, 2012 at 15:21 | #32

    Please observe my request not to engage in debate with other commenters – JQ

  33. Ernestine Gross
    April 26th, 2012 at 16:12 | #33

    JQ, thank you very much for providing the link to the public access issue of the Journal of Public Economic Theory, which includes your paper.

    The theory papers may assist in moderating the discussions, not least because it may become obvious to the readers that theory papers (math econ type) are aimed at understanding the nature of a problem rather than prescribing, say financial accounting rules. The paper by Olivier Gueant, Roger Guesnerie and Jean-Michel Lasry, seems to me to be particularly helpful in this regard (‘moderate’ and ‘radical environmentalists’ are provided with a common grammar and vocabulary that can also be adopted by ‘non-environmentalists’). And this language is accessable to people with, say a computing engineering background who enter politics (no names mentioned here) .

    Please keep your blog going.

  34. Freelander
    April 27th, 2012 at 02:10 | #34

    Strange the jq deletion under “We shall remember them ? (repost*)” for “engaging in debate” was not a case of “engaging in debate” but was, at most, simply implicitly asking for a clarification of something someone had said.

    Let me be clearer on the terms on which you can continue to comment here if you wish. State your own views on the post and related issues, but do not respond in any way to other commenters, no matter how innocent you perceive your response to be. I don’t have the time or energy to distinguish between, for example, genuine requests for clarification and snarky hints that the commenter concerned is confused. I request that other commenters should not take unfair advantage of this rule. If you disagree (or agree) with a point made by Freelander state your views, but don’t engage in dialogue. – JQ

  35. Ernestine Gross
    April 27th, 2012 at 11:54 | #35

    I agree with many of Freelander’s points (not restricted to this thread), and I often appreciate his witty and thought provoking one-liners. Freelander’s occasional criticism of my posts were fair enough and, if my memory serves me right, my rare criticisms of his posts did not lead to lengthy and stress producing dialogues. Personaly I learned quite a bit from observing how miscommunications develop on a thread and how patience runs out. I also learned, or should I say developed a maintained hypothesis that, it is useless to try to communicate with communications experts. This learning was possible only because of Prof Q’s tolerance.

  36. Freelander
    April 27th, 2012 at 18:16 | #36

    Thank-you Ernestine. But in saying that I’m breaking a jq edict. Naughty me.

Comments are closed.