Evaluating intergenerational consequences by dominance: Efficiency when future identities are unobservable

Abstract We examine the claim that Pareto Dominance can evaluate efficiency-improving policies with long-lasting intergenerational consequences. Climate policies is a prime example, seeking to correct the externality that emitters of greenhouse gases do not pay for the future consequences of their emissions. However, climate policies lead to different identities of future people, ruling out a personal interpretation of Pareto Dominance. Assuming that there are infinitely many future people whose identities are not observable, we specify conditions under which their spatiotemporal positions do not matter and where rank-ordered streams play an important role. We justify Rank-Order Dominance whereby a world a rank-order dominates another world b if a Pareto dominates b for earlier born people and Suppes-Sen dominates b for future people, where one of the two need not be strict. We illustrate the controversial and even counterintuitive properties of this dominance relation for policy choice.