Pareto criterion and long-term perspective criterion under myopic discounting

• Main Authors: Kang, Minwook, Wang, Lei
• Other Authors: School of Social Sciences
• Format: Article
• Language: English
• Published: 2019
• Subjects: Pareto Criterion; Long-term Perspective Criterion; Social sciences::Economic development
• Online Access: https://hdl.handle.net/10356/90015; http://hdl.handle.net/10220/49376; https://econpapers.repec.org/article/eblecbull/eb-18-00794.htm
• Institution: Nanyang Technological University

Under myopic discounting, which encompasses the famous psychological and economics model, hyperbolic discounting preferences, this paper shows that efficiency by the Pareto criterion is a sufficient condition for efficiency by the long-term perspective criterion. This result provides additional justification for Pareto-improving policies under myopic discounting by showing that such policies improve normative preferences as well. As an application of our result, we provide an example of Laibson's Pareto-improving consumption tax.