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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 748:
The limit of discounted utilitarianism

Adam Jonsson () and Mark Voorneveld ()

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; (follow links to similar papers)

JEL-Codes: D63; D70; D90; (follow links to similar papers)

16 pages, March 17, 2014, Revised February 1, 2017

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