Publication Date: April 2009
Suppose that there exists a positive (exogenous) probability that at each date of a possibly inﬁnite future, the human species will disappear. We postulate an Ethical Observer (EO) who must solve an intertemporal welfare maximization problem under this kind of uncertainty, with preferences that satisfy the expected utility hypothesis. Various social welfare criteria are expressed as alternative von Neumann-Morgenstern utility functions for the EO: utilitarianism, Rawlsianism, and an extension of the latter that corrects for the size of population. Our analysis covers, ﬁrst, a simple cake-eating economy, where the utilitarian and Rawlsian recommend the same intergenerational allocation. Second, we consider a productive economy with education and capital. There, however, the recommendations of the two Ethical Observers are in general (but not always) diﬀerent. Surprisingly, when the utilitarian optimization program diverges, then it is optimal for the extended Rawlsian to ignore the uncertainty concerning the possible disappearance of the human species in the future. We conclude with some thoughts about what these results imply for the issue of intergenerational welfare maximization in the presence of global warming.
Discounted utilitarianism, Rawlsian, Sustainability, Maximin, Uncertainty, Expected utility, von Neumann-Morgenstern, Dynamic welfare maximization
JEL Classification Codes: D63, D81, O40, Q54, Q56