“Future generations” are already here

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.

36 thoughts on ““Future generations” are already here

  1. 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.

  2. 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!

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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

  8. 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.

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