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Consumption, Risk and Prioritarianism

Adler, Matthew and Treich, Nicolas (2014) Consumption, Risk and Prioritarianism. TSE Working Paper, n. 14-500, Toulouse

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Most economic problems combining risk and equity have been studied under utilitarianism. As an alternative, we study consumption decisions under risk assuming a prioritarian social welfare function. Under a standard assumption about the utility function (i.e., decreasing absolute risk aversion), there is always more current consumption under ex ante prioritarianism than under utilitarianism. Thus, a concern for equity (in the ex ante prioritarian sense) means less concern for the risky future. In contrast, under standard utility and social welfare functions, there is less current consumption under ex post prioritarianism than under utilitarianism.

Item Type: Monograph (Working Paper)
Language: English
Date: February 2014
Place of Publication: Toulouse
Uncontrolled Keywords: Precautionary savings, utilitarianism, prioritarianism, discounting, climate change
JEL Classification: D81 - Criteria for Decision-Making under Risk and Uncertainty
E21 - Macroeconomics - Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
I31 - General Welfare; Basic Needs; Living Standards; Quality of Life; Happiness
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 09 Jul 2014 17:45
Last Modified: 07 Mar 2018 13:22
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