Destructive intergenerational altruism

Geir B. Asheim and Frikk Nesje

Photo: Association of Environmental and Resource Economics

Published in:

Journal of the Association of Environmental and Resource Economics, volume 3, number 4, pp. 957-984, 2016

 

DOI: 10.1086/688584

 

Abstract:

Are the probable future negative effects of climate change an argument for decreasing the discount rate to promote the interests of future generations? The analysis of the present paper suggests that such stronger intergenerational altruism might undermine future well-being if not complemented by collective climate action. In the standard one-sector model of economic growth normatively attractive outcomes will be implemented if each generation has sufficient altruism for its descendants. This conclusion is radically changed in a two-sector model where one form of capital is more productive than the other but leads to negative atmospheric externalities. In fact, the model shows that, if each dynasty is trying to get ahead in a world threatened by climate change by increasing its intergenerational altruism, then long-term well-being will be seriously undermined.

Published Feb. 2, 2017 11:02 AM - Last modified Feb. 2, 2017 11:14 AM