Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 748: The limit of discounted utilitarianism

Adam Jonsson () and Mark Voorneveld ()
Additional contact information
Adam Jonsson: Department of Engineering Sciences and Mathematics, Postal: LuleƄ University of Technology, 97187 LuleƄ, Sweden
Mark Voorneveld: Dept. of Economics, Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This paper presents an infinite-horizon version of intergenerational utilitarianism. By studying discounted utilitarianism as the discount factor tends to one, we obtain a new welfare criterion: limit-discounted utilitarianism (LDU). We show that LDU meets standard assumptions of efficiency, equity, and interpersonal comparability, but allows us to compare more pairs of utility streams than commonly-used utilitarian criteria, including the overtaking criterion and the catching-up criterion. We also introduce a principle of compensation for postponements of utility streams and use it to characterize the LDU criterion on a restricted domain.

Keywords: utilitarianism; intergenerational equity; time preference

JEL-codes: D63; D70; D90

16 pages, First version: March 17, 2014. Revised: February 1, 2017. Earlier revisions: April 24, 2014, April 24, 2014, February 23, 2015, February 23, 2015, October 28, 2015, October 28, 2015, September 26, 2016, September 26, 2016, February 1, 2017.

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