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Microeconomics Question from Walter E. Williams:Edit

It is sometimes argued that since future generations are not in any position to cast dollar votes (or for that matter any other vote) in influencing the saving-investment decisions of the current generation, there will be under-provision of the needs of the future because of "selfishness" on the part of the current generation. The rapid exploitation and even destruction of may of our natural resources are often cited as evidence for this contention. On the other hand, there is the indisputable evidence from modern history that each successive generation had been left richer than its predecessor. Comment and include the reason why present generations enrich future generations; what is the quid pro quo? (Remember that in this exchange future generations have not done anything for present generations.)

AnswerEdit

People have an incentive to maximize their present values as long as they have property rights. Property rights give entitlement to future profits, encouraging the owners to preserve the resource providing the wealth. Future incomes can be expressed through present value calculations, and then transferred. (EX: Home sale prices reflect the PV of rents in the future that would be paid to acquire a similar space.) If transfer of property rights is denied, it would provide an incentive for current owners to reap all possible profit from the existing resources as soon as possible, leaving nothing for the future, as the future has no value

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WEW Questions 81-100
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