Discussion Paper

No. 2009-8 | January 12, 2009
Avoiding Extinction: Equal Treatment of the Present and the Future

Abstract

Equal treatment for the present and the future was required in two axioms for sustainable development introduced by the author. This article shows that the two axioms are equivalent to awareness of physical limits in the long run future. We prove that two optimization problems are equivalent: maximizing discounted utility with a long run survival constraint, and maximizing utilites that treat equally the present and the future. The equal treatment axioms are therefore the essence of sustainable development. The "weight" λ given to the long run future is identified with the marginal utility of the environmental asset along a path that narrowly avoids extinction. An existence theorem is provided for optimizing according to the welfare criterion that treats equally the present and the future. We show that no prior welfare criteria satisfy the axioms for sustainable development introduced in [12].

Paper submitted to the special issue “Discounting the Long-Run Future and Sustainable Development”
 

JEL Classification

D63 D71 Q01

Cite As

Graciela Chichilnisky (2009). Avoiding Extinction: Equal Treatment of the Present and the Future. Economics Discussion Papers, No 2009-8, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2009-8

Assessment



Comments and Questions


Anonymous - Referee Report 1
January 26, 2009 - 10:41

This paper is a summary of the published work of the author on alternatives to standard intertemporal social welfare functions. It provides both motivation for the proposed approach, and brief proof guides to the mathematical results themselves.
In my opinion, it should be published.


Richard S.J. Tol - Devil's advocate
January 30, 2009 - 10:55

I really like this series of papers.

Let me play devil's advocate. The Chichilnisky welfare function has two components: Conventional net present welfare plus welfare of the limiting generation. Climate change is not really an issue in the first component because of discounting.

We only have coal to ...[more]

... burn for another 500 years or so. That implies that CO2 concentrations must be coming down no later than 2500, and the world will start to cool then. So, if the limiting generation is placed in the year 3000 or something, climate change will not be much of an issue in the second Chichilnisky component either.

Ergo, climate change is not an issue in the Chichilnisky welfare function.


Graciela Chichilnisky - Reply
February 03, 2009 - 14:37

The commentator is correct - global warming may cease to be a problem during this century -- and therefore may not be there for the very "long run". I certainly hope this is the case, and I want to believe it will be.

But we do not know ...[more]

... exactly when the problem will go away - and we are not sure it will go away - particularly if we disregard it. Today we have enormous difficulties dealing with environmental issues that are a long way into the future - our tools are limited to the short term.

The issues of global warming and biodiversity destruction are an illustration of the type of long run problems we face - with a long enough horizon that 'discounted utility' renders the issue almost irrelevant - although it is far from irrelevant as it may involve the survival of the species.

In other words: the article seeks a way to value problems that are very important for humans, but are in our long run future - problems that cannot be properly studied with discounted utility because (as I show in the article) discounted utility is a "dictatorship of the present" and neglects long run issues no matter how important or potentially catastrophic these may be.


Luc Lauwers - Reader Comment
February 16, 2009 - 09:38

see attached file


graciela chichilnisky - response
February 16, 2009 - 20:12

Luc Lauwers comments are insightful and add value to the original results. I agree with him on the whole, and a quick response may not do justice to his comments - therefore I will be providing a response that may require more space. In the meantime - many thanks for ...[more]

... great comments!