 Irreversibility and uncertainty cause an intergenerational equity-efficiency trade-offNikolai Hoberg and Stefan Baumgärtner Ecological Economics, 2017, vol. 131, issue C, 75-86 Abstract: Two important policy goals in intergenerational problems are Pareto-efficiency and sustainability, i.e. intergenerational equity. We demonstrate that the pursuit of these goals is subject to an intergenerational equity-efficiency trade-off. Our analysis highlights two salient characteristics of intergenerational problems and policy: (i) temporal irreversibility, i.e. the inability to revise one's past actions; and (ii) uncertainty of future consequences of present actions in human-environment systems. We employ a two-non-overlapping-generations model that combines an intragenerational production decision on the use of circulating capital and a non-renewable resource, with a negative intergenerational externality as an unforeseen contingency. If initially unknown problems become apparent and policy is enacted after irreversible actions were taken, policy-making faces a fundamental trade-off between ex-post Pareto-efficiency and sustainability. That is, one can achieve either one of these two goals, but not both. Keywords: Climate change; Closed ignorance; Intergenerational equity-efficiency trade-off; Irreversibility; Pareto-efficiency; Sustainability; Unawareness (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:131:y:2017:i:c:p:75-86 DOI: 10.1016/j.ecolecon.2016.08.015 Access Statistics for this article Ecological Economics is currently edited by C. J. Cleveland More articles in Ecological Economics from Elsevier |
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