Attribution: Please use this identifier to share, cite, or link to this item: http://hdl.handle.net/10625/38924
Title: Discounting climate change
Authors: Dasgupta, Partha
Keywords: UTILITARIANISM
PRIORITARIANISM
INTERGENERATIONAL WELL-BEING
SOCIAL DISCOUNT RATES
UNCERTAINTY
INEQUALITY AVERSION
RISK AVERSION
RATE OF TIME PREFERENCE
HYPERBOLIC DISCOUNING
RATE OF RETURN ON INVESTMENT
PRECAUTIONARY PRINCIPLE
ELASTICITY OF MARGINAL FELICITY
RISK-FREE DISCOUNT RATES
THIN-TAILED DISTRIBUTIONS
MODELS
ECONOMIC AND SOCIAL DEVELOPMENT
SOUTH ASIA
Date: 2008
Publisher: SANDEE, Kathmandu, NP
Series/Report no.: SANDEE working paper / South Asian Network for Development and Environmental Economics; no. 33-08
Abstract: In this paper I offer a fairly complete account of the idea of social discount rates as applied to public policy analysis. I show that those rates are neither ethical primitives nor observables as market rates of return on investment, but that they ought instead to be derived from economic forecasts and society’s conception of distributive justice concerning the allocation of goods and services across personal identities, time, and events. The welfare theory is developed in the context of three empirical studies on the economics of global climate change. I argue that the theoretical foundations of intergenerational welfare economics are still unsettled even in deterministic models. The standard precautionary motive for saving is then reviewed in the case where future uncertainties are not large. I then show that if the uncertainties associated with climate change and biodiversity losses are large, the formulation of intergenerational well-being we economists have grown used to could lead to ethical paradoxes even if the uncertainties are thin-tailed: an optimum policy may not exist. Various modelling avenues that offer a way out of the dilemma are discussed. It is shown that none of them is entirely satisfactory.
ISBN: 978-9937-8093-0-6
URI: http://hdl.handle.net/10625/38924
Project Number: 102580
Project Title: South Asian Network for Development and Environmental Economics (SANDEE)
Access: Open Access
Copyright: South Asian Network for Development and Environmental Economics (SANDEE)
License: OA Permission License
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