Intergenerational consumption rules: An axiomatization of utilitarianism and egalitarianism (Q1083341)

Rules are characterized that prescribe intergenerational consumption programs. The framework for this analysis is an infinite horizon, a single aggregate consumption good and a single consumer alive at any instant who represents his generation. An intergenerational allocation problem is defined by specifying a feasible set of consumption profiles. A solution of an allocation problem specifies a unique consumption stream from the feasible set and this consumption path resolves a conflict between generations. A set of axioms is formulated which are shown to characterize the egalitarian and the utilitarian consumption rules. The egalitarian consumption rule prescribes the largest constant consumption path that is feasible. In contrast, the utilitarian consumption rule admits trade-offs between generations in the sense that the relative magnitudes of consumption levels prescribed for any two generations can change depending on the price vector. The axioms which are considered are: efficiency, positivity, equity, symmetry, homogeneity, consistency, and continuity. Theorem 1 characterizes a consumption rule which satisfies all of the above properties except continuity. This rule consists of various utilitarian and egalitarian components. Theorem 2 uses the continuity property in addition and provides a characterization of the egalitarian rule on one side and the utilitarian rule on the other. It is shown that these rules exist on different price domains. Theorem 3 finally gives a characterization of the egalitarian consumption rule for a somewhat broader environment. In order to enlarge the environment a weaker version of the ''weak axiom of revealed preference'' is introduced.