Consumption, Risk and Prioritarianism

Authors

Matthew D. Adler, Duke Law SchoolFollow
Nicolas Treich

Document Type

Article

Publication Date

2014

Keywords

Precautionary savings, utilitarianism, prioritarianism, discounting, climate change

Abstract

In this paper, we study consumption decisions under risk assuming a prioritarian social welfare function, namely a concave transformation of individual utility functions. Under standard assumptions, there is always more current consumption under ex ante prioritarianism than under utilitarianism. Thus, a concern for equity (in the ex ante prioritarian sense) means less concern for the risky future. In contrast, there is usually less current consumption under ex post prioritarianism than under utilitarianism. We discuss the robustness of these results to learning, and to other forms of prioritarian social welfare functions.

Citation

Matthew D. Adler & Nicolas Treich, Consumption, Risk and Prioritarianism (October 4, 2014)