Intergenerational equity in economic, psychological, and sociological contexts, is the notion of fairness or justice between generations. The concept can be applied to fairness in dynamics between children, youth, adults, and seniors. It can also be applied to fairness between generations currently living and future generations. Conversations about intergenerational equity may include basic human needs, economic needs, environmental needs and subjective human well-being. It is often discussed in public economics, especially with regard to transition economics, social policy, and government budget-making. Many cite the growing U.S. national debt as an example of intergenerational inequity, as future generations will shoulder the consequences. Intergenerational equity is also explored in environmental concerns, including sustainable development, and climate change. The continued depletion of natural resources that has occurred in the past century will likely be a significant burden for future generations. Intergenerational equity is also discussed with regard to standards of living, specifically on inequities in the living standards experienced by people of different ages and generations. Intergenerational equity issues also arise in the arenas of elderly care, social justice, and housing affordability.
Political rights
The debate around youth rights, children's rights and the rights of future generations includes discussions around when people should have political power, and how much they should have. Adam Benforado argues, for example, that giving children more political rights than adults results in everyone being better off by, for example, increasing the salience of long-term issues. Those seeking rights or greater consideration for future generations discuss methods such as deliberative democracy, an ombudsman for future generations, or other institutions tasked specifically with considering future generations. Some advocates also want a child impact assessment of policies or decisions to evaluate outcomes for a specific child or even the next generation more broadly.
Public economics usage
History Since the first recorded debt issuance in Sumaria in 1796 BC, one of the penalties for failure to repay a loan has been debt bondage. In some instances, this repayment of financial debt with labor included the debtor's children, essentially condemning the debtor family to perpetual slavery. About one millennium after written debt contracts were created, the concept of debt forgiveness appears in the Old Testament, called Jubilee (Leviticus 25), and in Greek law when Solon introduces Seisachtheia. Both of these historical examples of debt forgiveness involved freeing children from slavery caused by their parents' debt. The leaders of the Haudenosaunee Confederacy considered the precept of seven generation sustainability when making present decisions that could have significant impact on their potential future descendants.
Pope Francis, in his 2015 encyclical letter Laudato si', commented thatWe can no longer speak of sustainable development apart from intergenerational solidarity. Once we start to think about the kind of world we are leaving to future generations, we look at things differently; we realize that the world is a gift which we have freely received and must share with others ... Intergenerational solidarity is not optional, but rather a basic question of justice.
Government debt
Higher government debt levels create significant costs for future taxpayers (e.g., higher taxes, lower government benefits, higher inflation, or increased risk of fiscal crisis). Stanley Druckenmiller and Geoffrey Canada call the large increase in government debt being left by the Baby Boomers to their children "Generational Theft". Future generations could benefit if the investments made with the debt are more valuable than the amount of debt they created. For example, to the extent that borrowed funds are invested today to improve the long-term productivity of the economy and its workers, such as via useful infrastructure projects, future generations may benefit. Economist Paul Krugman wrote in March 2013 that by neglecting public investment and failing to create jobs, we are doing far more harm to future generations than merely passing along debt: "Fiscal policy is, indeed, a moral issue, and we should be ashamed of what we're doing to the next generation's economic prospects. But our sin involves investing too little, not borrowing too much."
Pensions
Underfunded pensions can shift costs to younger generations, which can be motivated by intergenerational selfishness. The U.S. Social Security system has provided a greater net benefit to those who reached retirement closest to the first implementation of the system. The system is unfunded, meaning the elderly who retired right after the implementation of the system did not pay any taxes into the social security system, but reaped the benefits. Professor Michael Doran estimates that cohorts born previous to 1938 will receive more in benefits than they pay in taxes, while the reverse is true to cohorts born after. Also, that the long-term insolvency of Social Security will likely lead to further intergenerational transfers. However, Doran concedes that other benefits have been introduced into U.S. society via the welfare system, like Medicare and government-financed medical research, that benefit current and future elderly cohorts.
Investment management In the context of institutional investment management, intergenerational equity is the principle that an endowed institution's spending rate must not exceed its after-inflation rate of compound return, so that investment gains are spent equally on current and future constituents of the endowed assets. This concept was originally set out in 1974 by economist James Tobin, who wrote that "The trustees of endowed institutions are the guardians of the future against the claims of the present. Their task in managing the endowment is to preserve equity among generations."
Environmental usage
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