Equity and Time Consistency for Intertemporal Social Decisions

In this paper, we study intertemporal social welfare evaluations when agents' discount factors may be different. We first show that there exists a conflict between efficiency, equity, and time consistency, even if all agents share the same discount factor. We argue that this impossibility result is due to a tension between equity and time consistency regarding how the past should be taken into account when evaluating intertemporal distributions. Then, we instead introduce weaker requirements of time consistency and equity. On the one hand, using the weaker version of time consistency, we characterize a maximin social welfare ordering which completely ignores the past information. On the other hand, using the weaker form of equity, we characterize another maximin social welfare ordering which completely respects the past information