Irreversibility, ignorance, and the intergenerational equity-efficieny trade-off

Research output: Working paperWorking papers


We demonstrate the existence of an intergenerational equity-efficiency trade- off in policy-making that aims at Pareto-efficiency across generations and sustainability, i.e. non-decreasing utility over time. Our model includes two salient characteristics of sustainability problems and policy: (i) temporal irreversibility, i.e. the inability to re- vise one’s past actions; (ii) closed ignorance, i.e. future consequences of present actions in human-environment systems may be “unknown unknowns”. If initially unforeseen sustainability problems become apparent and policy is enacted after irreversible ac- tions were taken, policy-making faces a fundamental trade-off between intergenerational Pareto-efficiency and sustainability.
Original languageEnglish
Place of PublicationLüneburg
PublisherInstitut für Volkswirtschaftslehre der Universität Lüneburg
Number of pages32
Publication statusPublished - 02.2011