A Theory of Intergenerational Altruism

Econometrica · 2017 · Volume 85 · Issue 4

Abstract

Modeling intergenerational altruism is crucial to evaluate the long-term consequences of current decisions, and requires a set of principles guiding such altruism. We axiomatically develop a theory of pure, direct altruism: Altruism ispureif it concerns the total utility (rather than the mere consumption utility) of future generations, anddirectif it directly incorporates the utility of all future generations. Our axioms deliver a new class of altruistic, forward-looking preferences, whose weight put on the consumption of a future generation generally depends on the consumption of other generations. The only preferences lacking this dependence correspond to the quasi-hyperbolic discounting model, which our theory characterizes. Our approach provides a framework to analyze welfare in the presence of altruistic preferences and addresses technical challenges stemming from the interdependent nature of such preferences.

Keywords

Pure altruism, nonpaternalistic altruism, time inconsistency, present bias, intergenerational welfare, quasi-hyperbolic discounting, welfare criterion

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