A Biological Theory of Social Discounting

We consider a growth model in which intergenerational transfers are made via stocks of private and public capital. Private capital is the outcome of individuals ’ private savings while decisions regard-ing public capital are made collectively. We hypothesize that pri-vate saving choices evolve through individual selection while public saving decisions are the result of group selection. The main result of the paper is that the equilibrium rate of return to private capi-tal is at least 2-3 % more than the rate of return to public capital. In other words, social choices involving intertemporal trade-offs exhibit much more patience than individual choices do. Policy issues often involve intergenerational trade-offs. One highly publicized and polarizing example concerns the appropriate response to global warming. While Nordhaus (1994) concluded that there was no need to enact draconian poli-cies to reduce CO2 emissions immediately, Stern (2006) insisted that the situation was in fact dire. The difference in position can be attributed almost exclusivel