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The fairness of discounting: a majority rule approach

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Abstract

A model of majority rule is developed in which each of a finite number of generations votes on a redistribution of income between itself and the other generations. In voting, each generation expresses tastes for its own income and for the distribution of income across generations. The model is then used to derive the conditions under which discounting is justified — namely those conditions for which the majority rule exhibits a positive marginal rate of time preference. It is demonstrated that when each generation is wealthier than those preceding it, the parameters representing the taste for income equality must be relatively high for the majority rule to exhibit a positive marginal rate of time preference. Copyright Martinus Nijhoff Publishers 1987
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  • Stephen P. A. Brown, 1985. "The fairness of discounting: a majority rule approach," Working Papers 8505, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:85-05
    Note: Published as: Brown, S.P.A. (1987), "The Fairness of Discounting: A Majority Rule Approach," Public Choice 55 (3): 215-226.
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    1. Hamada, Koichi, 1973. "A simple majority rule on the distribution of income," Journal of Economic Theory, Elsevier, vol. 6(3), pages 243-264, June.
    2. Becker, Robert A., 1982. "Intergenerational equity: The capital-environment trade-off," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 165-185, June.
    3. Gordon Tullock, 1964. "The Social Rate of Discount and the Optimal Rate of Investment: Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(2), pages 331-336.
    4. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    5. Stephen A. Marglin, 1963. "The Social Rate of Discount and The Optimal Rate of Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 77(1), pages 95-111.
    6. Lester C. Thurow, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(2), pages 327-336.
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