Utilitarianism, Prioritarianism, and Intergenerational Equity: A Cake Eating Model

Adler, Matthew and Treich, Nicolas (2017) Utilitarianism, Prioritarianism, and Intergenerational Equity: A Cake Eating Model. Mathematical Social Sciences, 87. pp. 94-102.

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Official URL: http://tse-fr.eu/pub/31580

Abstract

We use a simple consumption model, the so-called cake eating model, to study the interaction of equity, time and risk in social decision making. Total consumption, the “cake,” is uncertain. The social planner allocates consumption between two agents (representing two generations), by assigning the first a determinate amount, with the second receiving the risky remainder. We study this consumption allocation decision using three social welfare functions: utilitarianism, ex ante prioritarianism, and ex post prioritarianism. Under standard assumptions, ex ante prioritarianism allocates more consumption to the first generation than utilitarianism. Thus, a concern for equity, in the ex ante prioritarian sense, means less concern for the risky future. By contrast, ex post prioritarianism normally chooses less consumption for the first generation than utilitarianism. We discuss the robustness of these optimal consumption allocations to learning and to more complicated social welfare functions.

Item Type: Article
Language: English
Date: 11 March 2017
Refereed: Yes
JEL codes: 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
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 23 Mar 2017 08:56
Last Modified: 07 Mar 2018 13:24
OAI ID: oai:tse-fr.eu:31580
URI: http://publications.ut-capitole.fr/id/eprint/23267

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