NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Sustainability in a Risky World

John Y. Campbell, Ian Martin

NBER Working Paper No. 28899
Issued in June 2021
NBER Program(s):Asset Pricing, Environment and Energy Economics, Public Economics

We view sustainability as a requirement that welfare should not be expected to decline over time. We impose this requirement as a prior constraint on the consumption-savings-investment problem, and study its implications for saving, risky investment, and the social discount rate. The constraint does not distort portfolio choice, but it imposes an upper bound on the sustainable time preference rate and on the sustainable consumption-wealth ratio, which we show must lie between the riskless rate and the expected return on optimally invested wealth.

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Acknowledgments and Disclosures

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w28899

  
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