Wednesday, June 15, 2011

Intergenerational Pareto (In)Efficiency

Prompt: Why might excessive resource use have greater impacts on future generations than the current one? Consider the definition of Pareto efficient allocation. If the current generation is the de facto owner of all resources, could it be Pareto efficient for this generation to consume fewer resources so that future generations are better off?

There are many reasons resource use in the present could have a greater impact—positive or negative—on future generations than the present generation. For example, suppose there is a stockpile of grain sufficient to feed one person for one year. Someone, free from the burden of having to find food, could spend a year developing methods to produce food more efficiently, which could reduce food scarcity for future generations far more than the stock of food that was consumed to develop those methods.

More relevant to the topic at hand, present consumption can have powerful negative effects on future wellbeing. Many fisheries are presently severely depleted and dangerously close to collapse. The aggressive harvest of the remaining fish in a depleted fishery may increase present-day wellbeing a bit, but if it results in the collapse of a fishery, it would have dramatic negative effects on future wellbeing.

Pareto efficient allocation is the state of a system at which no alternative allocation of resources exists that would make anyone better off without making someone else someone worse off. If future beings are included in the system, it becomes clear that Pareto efficiency demands restraint on the current generation.

Considering the potential breach of feedback loop tipping points, such as desertification of forests and irreversible increases in atmospheric carbon, present consumption levels and methods are likely very, very far from Pareto efficient.

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