Model predictive control, the economy, and the issue of global warming

Thierry Bréchet, Carmen Camacho () and Veliov Vladimir
Additional contact information
Carmen Camacho: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Veliov Vladimir: Institute of Mathematical Methods in Economics - Viena University of Technology

Post-Print from HAL

Abstract: This study is motivated by the evidence of global warming, which is caused by human activity but affects the efficiency of the economy. We employ the integrated assessment Nordhaus DICE-2007 model (Nordhaus, A question of balance: economic modeling of global warming, Yale University Press, New Haven, 2008). Generally speaking, the framework is that of dynamic optimization of the discounted inter-temporal utility of consumption, taking into account the economic and the environmental dynamics. The main novelty is that several reasonable types of behavior (policy) of the economic agents, which may be non-optimal from the point of view of the global performance but are reasonable form an individual point of view and exist in reality, are strictly defined and analyzed. These include the concepts of "business as usual", in which an economic agent ignores her impact on the climate change (although adapting to it), and of "free riding with a perfect foresight", where some economic agents optimize in an adaptive way their individual performance expecting that the others would perform in a collectively optimal way. These policies are defined in a formal and unified way modifying ideas from the so-called "model predictive control". The introduced concepts are relevant to many other problems of dynamic optimization, especially in the context of resource economics. However, the numerical analysis in this paper is devoted to the evolution of the world economy and the average temperature in the next 150 years, depending on different scenarios for the behavior of the economic agents. In particular, the results show that the "business as usual", although adaptive to the change of the atmospheric temperature, may lead within 150 years to increase of temperature by 2°C more than the collectively optimal policy.

Date: 2011-04
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Published in Annals of Operations Research, 2011, Online (24 p.). ⟨10.1007/s10479-011-0881-8⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Model predictive control, the economy, and the issue of global warming (2014)
Working Paper: Model predictive control, the economy, and the issue of global warming (2014)
Working Paper: Model predictive control, the economy, and the issue of global warming (2011)
Working Paper: Model predictive control, the economy, and the issue of global warming (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00683813

DOI: 10.1007/s10479-011-0881-8

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().