Pareto Principle and Intergenerational Equity: Immediate Impatience, Universal Indifference and Impossibility

Abstract

In an important contribution to the problem of aggregating infinite utility streams, Svensson (1980) shows the existence of a social welfare relation — a reflexive, transitive and complete binary relation over all possible infinite utility streams that accommodates the axioms of Pareto and intergenerational equity. This possibility result is in sharp contrast with the seminal contribution by Diamond (1965) in the same context of aggregating infinite utility streams, who established the non-existence of a social welfare function — a function which aggregates an infinite utility stream into a real number that satisfies the axioms of Pareto, intergenerational equity and continuity (in the suprametric). The axiom of continuity in Diamond’s result is shown to be redundant by Basu and Mitra (2003a) recently: they show that, in aggregating infinite utility streams, there exists no social welfare function satisfying the axioms of Pareto and intergenerational equity.