Consumption, Risk and Prioritarianism

Abstract

Most economic problems combining risk and equity have been studied under utilitarianism. As an alternative, we study consumption decisions under risk assuming a prioritarian social welfare function. Under a standard assumption about the utility function (i.e., decreasing absolute risk aversion), 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, under standard utility and social welfare functions, there is less current consumption under ex post prioritarianism than under utilitarianism.

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Replaced by

Matthew Adler, and Nicolas Treich, “Utilitarianism, Prioritarianism, and Intergenerational Equity: A Cake Eating Model”, Mathematical Social Sciences, vol. 87, May 2017, pp. 94–102.

Reference

Matthew Adler, and Nicolas Treich, “Consumption, Risk and Prioritarianism”, TSE Working Paper, n. 14-500, February 2014.