Intertemporal Preferences and Intergenerational Equity Considerations in Optimal Resource Harvesting

Optimal resource harvesting decisions are reexamined in light of a distinction between personal discount rates, reflecting individuals′ rate of time preference, and generational discount rates, reflecting considerations of equity for future generations. The discount rates have partially counteracting effects upon the optimal harvesting decisions and upon the optimal distribution of benefits in any one period. For instance, it is the generational discount rate that determines the potential for "economically optimal extinction" of a renewable resource. By distinguishing the two discount rates it is possible to give each generation equal consideration while still allowing for individual impatience.