Global Warming and Hyperbolic Discounting

Larry Karp

No 25069, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: The use of a constant discount rate to study long-lived environmental problems such as global warming has two disadvantages: the prescribed policy is sensitive to the discount rate, and with moderate discount rates, large future damages have almost no effect on current decisions. Time-consistent quasi-hyperbolic discounting alleviates both of these modeling problems, and is a plausible description of how people think about the future. We analyze the time-consistent Markov Perfect equilibrium in a general model with a stock pollutant. The solution to the linear-quadratic specialization illustrates the role of hyperbolic discounting in a model of global warming.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 32
Date: 2004
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Global warming and hyperbolic discounting (2005)
Working Paper: Global warming and hyperbolic discounting (2005)
Working Paper: Global Warming and Hyperbolic Discounting (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:25069

DOI: 10.22004/ag.econ.25069

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