What Do We Owe Future Generations?

Income redistribution is usually based on the principle that an extra dollar is worth more to a poor man than to a rich man. A reasonable estimate is that if your income is Y, then the value to you of an additional dollar is proportional to 1/Y³. (It's possible to infer such estimates from observations of the risks people are willing to take in order to earn an extra dollar. According to such estimates, the exponent 3 could really be as low as 1 or as high as 10.)

If income grows at a rate g, then people living n years from now will earn (1+g)ⁿ times what we do. Thus if we can undertake an investment or conservation project that confers benefits n years in the future, we should "discount" the value of those benefits by a factor of about 1/(1+g)³ⁿ.

In fact, when we decide whether to take on a project, we do discount the value of future benefits, but by the factor 1/(1+r)ⁿ, where r is the rate of return on our investments. That means that as long as 3g>r (as is almost surely the case), we probably take on more investment projects than would be recommended by the philosophy of income redistribution; that is, we are doing more than enough for future generations already.

If the exponent 3 is replaced by anything less than about 2, then it follows that we should be somewhat more generous to our descendants, but still surely on nothing like the scale that the Sierra Club envisions.