Ross Guest, Ph.D., Griffith Business School, Griffith University, PMB 50 Gold Coast Mail Centre, Queensland, 9726, Australia and John Creedy, Ph.D., Department of Economics, University of Melbourne, Department of Economics, The University of Melbourne,, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia.
This paper examines the implications of adopting alternative value judgements when evaluating future consumption streams in the context of damage abatement. The paper focusses on a form of ‘sustainable preferences’ designed to avoid either a dictatorship by present or by future generations which can arise when using a ‘standard’ social welfare function. Numerical examples are reported, based on a simple growth model, under alternative damage abatement parameters and welfare functions. The results illustrate how sustainable preferences effectively reduce the damages on future consumption by shifting consumption from the present to the future. This implies an intergenerational trade-off. An explicit policy of damage abatement under a standard social welfare function implies a similar intergenerational trade-off. However, the results suggest that damage abatement does not penalise current generations as much under sustainable preferences as it does under standard value judgements.