Cross-Dynastic Intergenerational Altruism

Abstract

Decisions with long-term consequences require comparing utility derived from present consumption to future welfare. But can we infer socially relevant intertemporal preferences from saving behavior? I allow for a decomposition of the present generation's preference for the next generation into its dynastic and crossdynastic counterparts, in the form of welfare weights on the next generation in the own dynasty and other dynasties. Welfare weights on other dynasties can be motivated by a concern for sustainability, or if descendants may move or marry outside the dynasty. With such cross-dynastic intergenerational altruism, savings for one's own descendants benefit present members of other dynasties, giving rise to preference externalities. I find that socially relevant intertemporal preferences may not be inferred from saving behavior if there is cross-dynastic intergenerational altruism. I also show that the external effect of present saving decreases over time. This means that intertemporal preferences inferred from saving behavior are time-inconsistent, unless cross-dynastic intergenerational altruism is accounted for.

Philosophers reinforce economists' support for UN climate targets, but disagree on why

“…Yet many have argued that economists do not have any special expertise in providing advice on the ethical aspects of the SDR [10]. Rather, economics has been described as being 'value-free' [11] due to a reliance on revealed preference and economic fundamentals to identify what is socially desirable [12,13]. This has not gone unnoticed and recent advice aimed at the review of the SCC by the Biden Administration recommended to "seek broad input", including from philosophers [4, p549] who have specific expertise in complex ethical matters.…”

“…There are several theoretical arguments that support these positions. The Discounted Utilitarian approach is a normative framework, yet the parameters of the Ramsey Rule can in some circumstances be calibrated using individually or socially revealed preferences (E4) [8,12,13]. Expected growth is arguably an unavoidably positive quantity even when applied within an otherwise normative calibration of the SRR, as recognized by respondents in both samples.…”