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Pareto criterion and long-term perspective criterion under myopic discounting

Author

Listed:
  • Minwook Kang

    (Nanyang Technological University)

  • Lei Wang

    (Nanyang Technological University)

Abstract

Under myopic discounting, which encompasses the famous psychological and economics model, hyperbolic discounting preferences, this paper shows that efficiency by the Pareto criterion is a sufficient condition for efficiency by the long-term perspective criterion. This result provides additional justification for Pareto-improving policies under myopic discounting by showing that such policies improve normative preferences as well. As an application of our result, we provide an example of Laibson's Pareto-improving consumption tax.

Suggested Citation

  • Minwook Kang & Lei Wang, 2019. "Pareto criterion and long-term perspective criterion under myopic discounting," Economics Bulletin, AccessEcon, vol. 39(1), pages 24-32.
    • Handle: RePEc:ebl:ecbull:eb-18-00794
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    References listed on IDEAS

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    Cited by:

    1. Kang, Minwook & Ye, Lei Sandy, 2023. "Dividend and corporate income taxation with present-biased consumers," Journal of Banking & Finance, Elsevier, vol. 152(C).
    2. Aviad Heifetz & Enrico Minelli & Herakles Polemarchakis, 2021. "Liberal parentalism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1107-1129, December.
    3. Kang, Minwook, 2020. "Demand deposit contracts and bank runs with present biased preferences," Journal of Banking & Finance, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    Pareto criterion; long-term perspective criterion; hyperbolic discounting; present-bias;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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