Following the golden rule: Negishi welfare weights without apology

It is often necessary to specify social welfare functions (SWFs) to allocate forms of capital that provide public services to heterogeneous agents yet lie outside of capital markets. Of the SWFs consistent with Pareto optimality, only weighted combinations of individual utilities with “Negishi”, inverse marginal utility of the numeraire (income), weights replicate market outcomes for given initial resource allocations. This feature motivates Negishi weights’ extensive use in applied economics, including in high-profile integrated assessment models of economic growth and climate change. Nevertheless, Negishi weights are often criticized on ethical grounds. We show the Negishi SWF is ethically consistent with the ‘Golden Rule,’ whereby the social planner weights others’ utilities at a point in time as he would weight his own future discounted utility. This result clarifies the implicit ethical assumptions embodied in many economic models. We also show that a specific link exists between Negishi weights and a generalization of the Ramsey discounting rule.