Antony Millner (LSE Grantham Institute): Resolving intertemporal conflicts: Economics vs. Politics

Intertemporal conflicts occur when a group of agents with heterogeneous time preferences must make a collective decision. How should this be done? We examine two methods: an ‘Economics’ approach that emphasizes efficiency, and a ‘Politics’ approach in which agents vote over plans. If the group can commit to intertemporal plans Economics Pareto dominates Politics, regardless of whether agents’ preferences are public or private information. Without commitment however, Politics often yields higher group welfare, as it is more robust to outlying preferences. Our results have implications for social discounting, and decision-making by families, firms, and coun-tries. (joint with Geoffrey Heal)