greatest good for the greatest number of people. Originating from the works of Bentham and John Stuart Mill, this approach evaluates actions or policies based on their consequences, emphasizing long-term outcomes rather than intentions or intrinsic qualities. In decision-making, the utilitarian perspective involves calculating the net benefits of an action by weighing its positive and negative impacts on all stakeholders. It is widely used in cost-benefit analysis, where decisions aim to maximize aggregate welfare. Historically, economists such as Ramsey 42 argued that it was "ethically indefensible" to discount future utility too heavily, implying that policy makers should prioritize future generations more than individuals prioritize their own future. While this was later contested by the concept of revealed preferences within markets, it is the authors’ opinion that future generations must be borne into consideration more systematically within investment decisions. Similarly, Gollier (2002) 43 suggested that the logic of remedial investments in climate mitigation or transition today reflect the urgent need to frame addressing the climate crisis in terms of the substantial future benefits of such action; as well as the counterfactual of present inaction leading to catastrophic climate-related damage to economies. Moreover, reflecting a public benefit logic, it is common for governments to use ‘social’ discount rates that decline over time, increasingly giving more weight to the lived value of future generations. 44 Reliance on market rates imports the revealed preferences of individuals, which are often time- inconsistent, into social planning, embedding structural inequities and reinforcing ‘tragedy of the commons’ 45 dynamics. Standard economic models rely on revealed preferences, i.e., current choices (such as consumption, investment) fully reflect individual preferences over time. However, decision-makers at any point in time cannot change decisions made in the past, creating an asymmetry in intertemporal control. Market choices made today do not reveal preferences over past consumption, because once a decision has been made, future selves cannot revisit it. This suggests that revealed preferences do not adequately guide long-term policy, as they are based on incomplete information about preferences over past and future 46 . Arrow and Kurz (1970) 47 suggested that the preferences revealed by individual behaviour in markets (revealed preferences) should guide public policy, even in intertemporal (time-based) choices. However, this is challenged by Caplin and Leahy (2004), who state that while this works for static (one-time) decisions, it is flawed in dynamic settings (decisions over time). They stated that “there may be a single unified perspective on the static problem, but not on the dynamic problem.’ 48 The Strotz model (1956) 49 allows for preferences to change over time and account for past consumption, as individuals demonstrate changing utility functions over time. That at t 1 an individual may assign a higher weight to future rewards, however, at t 2 , their utility function changes, favouring immediate gratification over longer term gains. The implications for this are extensive and the examples are many and include dynamic inconsistencies around defining a plan that may seem optimal, only for it to be abandoned at a later stage. We have seen this, for example, with public policy on climate in multiple jurisdictions. In turn, this can lead to myopic behaviour 42 Ramsey, F.P., 1928. A mathematical theory of saving. The economic journal, 38(152), pp.543-559. 43 Gollier 2002 Discounting an Uncertain Future, Journal of Public Economics, 85 149–166 44 See, for example: Freeman and Groom, 2016 and Arrow et al, 2013. 45 See Ostrom, E. (2008). Tragedy of the Commons. The New Palgrave Dictionary of Economics, pp.1–5. 46 See Caplin. A, and Leahy, J., The Social Discount Rate, New York University and National Bureau of Economic Research, 2004 47 Arrow, K.J. and Kurz, M., 1970. Optimal growth with irreversible investment in a Ramsey model. Econometrica: Journal of the Econometric Society , pp.331-344. 48 Caplin. A, and Leahy, J., The Social Discount Rate, New York University and National Bureau of Economic Research, 2004, p. 1260 49 Strotz, R.H., 1956. The role of stereotypes in welfare economics. Metroeconomica , 8 (3), pp.199-202.
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