Abstract
The article shows that a Paretian social welfare function can be history independent and time consistent only if a stringent set of conditions is verified. Individual utilities must be additive. The social welfare function must be a linear combination of these utilities. Social preferences are stationary only if, in addition, all individuals have the same constant discount rate. The results are implemented in two frameworks: deterministic dynamic choice and dynamic choice under uncertainty. The applications highlight that the conditions are unlikely to be met by individual preferences, and that they severely restrict social preferences.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Aczél J. (1966) Lectures on Functional Equations and their Applications. Academic Press, New York
Beals R., Koopmans T. J. (1969) Maximizing stationary utility in a constant technology. SIAM Journal of Applied Mathematics 17: 1001–1015
Becker G. S., Mulligan C. B. (1997) The endogenous determination of time preference. Quarterly Journal of Economics 112: 729–758
Becker R. A., Boyd H., Sung B. Y. (1989) Recursive utility and optimal capital accumulation. I. Existence. Journal of Economic Theory 47: 76–100
Blackorby C., Nissen D., Primont D., Russell R. (1973) Consistent intertemporal decision making. Review of Economic Studies 40: 239–248
Blackorby, C., Bossert, W., & Donaldson, D. (2005). Temporal consistency. In Population Issues in Social Choice Theory, Welfare Economics, and Ethics (pp. 272–285). Cambridge: Cambridge University Press.
Chavas J.-P. (2004) On impatience, economic growth and the environmental Kuznets curve: a dynamic analysis of resource management. Environmental and Resource Economics 28: 123–152
Chew S. H., Ho J. L. (1994) Hope: An empirical study of attitude toward the timing of uncertainty resolution. Journal of Risk and Uncertainty 8: 267–288
Dasgupta P., Heal G. (1979) Economic Theory and Exhaustible Resources. Cambridge University Press, Cambridge
Deaton A. (1971) A reconsideration of the empirical implications of additive preferences. Economic Journal 74: 338–348
Debreu G. et al (1959) Topological methods in cardinal utility theory. In: Arrow K., Karlin S., Suppes P. (eds) Mathematical Methods in Social Sciences. Standford University Press, Standford, pp 16–26
Eeckhoudt L., Rey H., Schlesinger B. (2007) A good sign for multivariate risk taking. Management Science 53: 117–124
Epstein L. G., Hynes J. A. (1983) The rate of time preference and dynamic economic analysis. Journal of Political Economy 91: 611–635
Epstein L. G., Zin S. E. (1989) Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework. Econometrica 57: 937–969
Epstein L. G., Tanny S. M. (1980) Increasing generalized correlation: A definition and some economic consequences. Canadian Journal of Economics 13: 16–34
Fleurbaey M., Mongin P. (2005) The news of the death of welfare economics is greatly exaggerated. Social Choice and Welfare 25: 381–418
Gorman W. M. (1968) The structure of utility functions. Review of Economic Studies 35: 367–390
Harsanyi J. C. (1955) Cardinal welfare, individualistic ethics, and interpersonal comparisons of utility. Journal of Political Economy 63: 309–321
Johnsen T. H., Donaldson J. B. (1985) The structure of intertemporal preferences under uncertainty and time consistent plans. Econometrica 53: 1451–1458
Koopmans T. C. (1960) Stationary ordinal utility and impatience. Econometrica 28: 287–309
Kreps D. M., Porteus E. L. (1978) Temporal resolution of uncertainty and dynamic choice theory. Econometrica 46: 185–200
Lucas R. E., Stokey N. L. (1984) Optimal growth with many consumers. Journal of Economic Theory 32: 139–171
Obstfeld M. (1981) Macroeconomic policy, exchange-rate dynamics, and optimal asset accumulation. Journal of Political Economy 89: 1142–1161
Palivos T., Wang P., Zhang J. (1997) On the existence of balanced growth equilibrium. International Economic Review 38: 205–224
Ramsey F. P. (1928) A mathematical theory of saving. Economic Journal 38: 543–559
Richard S. F. (1975) Multivariate risk aversion, utility independence and separable utility functions. Management Science 22: 12–21
Samuelson P. A. (1937) A note on measurement of utility. Review of Economic Studies 4: 155–161
Streufert P.A. et al (1998) Recursive utility and dynamic programming. In: Barberà S., Hammond P.J., Seidl C. (eds) Handbook of Utility Theory: Volume 1. Principles. Kluwer Academic Publishers, Dordrecht, pp 93–122
Uzawa H. (1968) Time preference, the consumption function and optimum asset holdings. In: Wolfe J. (eds) Value Capital and Growth: Papers in Honour of Sir John Hicks. University of Edinburgh Press, Edinburgh, pp 485–504
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Zuber, S. The aggregation of preferences: can we ignore the past?. Theory Decis 70, 367–384 (2011). https://doi.org/10.1007/s11238-010-9225-4
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11238-010-9225-4