Open access
UTILITARIAN ASSUMPTIONS IN INTERGENERATIONAL INVESTMENT APPRAISAL
Monika FOLTYN-ZARYCHTA1
Economic Challenges of Modern Transformations
Publication language: Polish
Journal article
Transformations No. 1-2 (92-93) 2017, Publication date: 23 May 2017
Keywords: intergenerational investment, utilitarianism, cost-benefit analysis
Abstract The paper analyses three basic features of utilitarianism: welfarism, sum-ranking and consequentialism which form the theoretical basis for economic net present value (costbenefit analysis decision criterion) for appraisal of intergenerational investments. The results show that the features are not theoretically sufficient due to inexistence of future generations’ preferences, inability to apply Kaldor-Hicks potential compensation test and to assign future generations existence value. The paper suggests possible modifications of cost-benefit analysis to overcome the utilitarian failures, i.e. time-declining discount rate and introduction of deontological assumptions allowing to include present generation’s altruistic preferences toward unborn people.
Uniwersytet Ekonomiczny w Katowicach
E-mail: monika.foltyn-zarychta@ue.katowice.pl