Department of Agricultural and Resource Economics, UCB
Sustainability, Limited Substitutability and Non-Constant Social Discount Rates
- Author(s): Traeger, Christian P.
- et al.
The paper explores the consequences of limited substitutability in welfare between environmental and produced goods for long-term evaluation. I show how the magnitude and time development of optimal social discount rates depend on the substitutability between the different classes of goods. The notions of weak and strong sustainability are translated into the degree of substitutability. I show that a strong notion of sustainability results in lower weights given to long-run service and consumption streams compared to a weak notion of sustainability.