Heterogeneous intergenerational altruism

Produced as part of the Managing climate risks and uncertainties and strengthening climate services CCCEP research programme theme

Agents exhibit pure intergenerational altruism if they care not just about the consumption utility experienced by future generations, but about their total wellbeing. If all generations are altruistic, each generation’s wellbeing depends on the wellbeing of its descendants. Thus pure intergenerational altruism causes generations’ preferences to be interdependent. While existing models study the relationship between pure intergenerational altruism and conventional time preferences, they assume that altruistic preferences are homogeneous across society. In effect, agents impose their own preferences on future generations, whether they share them or not. By contrast, we study pure intergenerational altruism when agents’ preferences are heterogeneous and fully non-paternalistic, i.e. they evaluate the wellbeing of future agents according to their own sovereign intergenerational preferences. We demonstrate that homogeneous models of intergenerational altruism over (under) estimate the weight an agent places on future utilities if she is less (more) altruistic than average. Moreover, all non-paternalistic agents agree on the appropriate long-run utility discount rate, regardless of their preferences. In general, existing derivations of exponential or quasi-hyperbolic time preferences from homogeneous models of pure intergenerational altruism are not robust to heterogeneity.