Altruism, Gaussian curvature and Pareto Optimality: An Implication for Sen’s Meta Ranking Ethical Principle

Abstract

The paper extends the Samuelsonian overlapping generations framework to encompass a variety of altruistic preferences, recasting it into a Lindahl equilibrium framework. It has been shown that altruism towards parents provides an alternative answer to the basic question of capital theory as to why interest rates are positive. It is shown that a sufficiently strong altruism towards parents can change a Pareto inefficient Samuelsonian economy with negative interest rate to an efficient classical economy with positive interest rate. Based on Sen’s meta ranking concept, the paper proposes an ethical principle to supplement the equilibrium theory for guiding agents in their choice of the degree of altruism towards their parents.