On discounting and voting in a simple growth model

Abstract

In dynamic resource allocation models, the non-existence of voting equilibria is a generic phenomenon due to the multi-dimensionality of the choice space even with agents heterogeneous only in their discount factors. Nevertheless, at each point of time there may exist a "median voter" whose preferred instantaneous consumption rate is supported by a majority of agents. Based on this observation, we propose an institutional setup ("intertemporal majority voting") in a Ramsey-type growth model with common consumption and heterogeneous agents, and show that it provides a microfoundation of the choice of the optimal consumption stream of the median agent. While the corresponding intertemporal consumption stream is in general not a Condorcet winner among all feasible paths, its induced instantaneous consumption rate receives a majority at each point in time in the proposed intertemporal majority voting procedure. We also provide a characterization of balanced-growth and steadystate voting equilibria in the case in which agents may differ not only in their time preference, but also in their instantaneous utility functions.JEL Classification: D11, D71, D91, O13, O43.

Collective Choice with Heterogeneous Time Preferences

“…21 Clearly, it coincides with the optimal path of consumption rates for the agent with the median discount factor, E * = E 2 * , and uniquely corresponds to her optimal path. Borissov et al (2017) show that this result holds in more general settings, including the infinite horizon many-agent Ramsey model with common consumption. 22 It is instructive to compare the outcome of intertemporal majority voting with the two impossibility results of Jackson and Yariv (2015).…”

“…Nevertheless, a stable outcome of dynamic voting can be obtained by applying a Kramer-Shepsle procedure in terms of consumption rates. Borissov et al (2017) consider a simple voting procedure referred to as intertemporal majority voting based on three principles: i) agents vote step by step; ii) agents vote over relative values and not absolute values (consumption rates instead of levels); and iii) agents have perfect foresight about outcomes of future votes. It is proved that when agents have identical felicity functions, the outcome of intertemporal majority voting is the optimal path for the agent with the median discount factor.…”

A Division of Society into the Rich and the Poor: Some Approaches to Modeling

“…Здесь теория экономического роста встречается с теорией общественного выбора. В последнее время активно развиваются модели динамического голосования (см., например, (Borissov et al, 2017;Borissov, Pakhnin, 2018)). Исследования политэкономических механизмов делают только первые шаги, но можно надеяться, что дальнейшие работы смогут внести вклад и в изучение динамики неравенства.…”

Economic growth and property rights on natural resources

“…The first channel assumes that the discount factors of agents are formed endogenously, and the rise in income inequality increases the impatience of agents (see Borissov and Lambrecht, 2009). 5 The second channel assumes that a certain 3 See also Borissov et al (2015), where the fundamentals of the proposed intertemporal majority voting approach are discussed in a general case, though in a somewhat different framework. 4 Since Long (1975), the common wisdom has been that ownership risk induces a firm to overuse the stock of a resource, though the empirical evidence is ambiguous.…”

“…Only in this particular case we can apply our approach to voting in a dynamic general equilibrium framework. A model with general utility and production functions in a dynamic optimization context is proposed byBorissov et al (2015).…”