Sustainability in a Risky World

Publication Date
Financial Markets Group Discussion Papers DP 830
Publication Date
Paul Woolley Centre Discussion Papers No 76
Publication Authors

This paper studies the restrictions on consumption, portfolio choice, and social discounting implied by a sustainability constraint, that utility should not be expected to decline over time, in an economy with risky investment opportunities. The sustainability constraint does not distort portfolio choice and implies a consumption-wealth ratio and social discount rate that can be considerably higher than the riskless interest rate.