The Sign of Risk for Present Value of Future Losses

Brian P. Hanley and Steve Keen

Papers from arXiv.org

Abstract: In the ongoing debate over discount rates and climate change, William Nordhaus has championed a higher discount rate to account for risk. Nicholas Stern has championed a lower rate. Here we prove that in the case of a stream of future losses, risk can only be represented by a lower discount rate, never a higher one.

Date: 2022-08
New Economics Papers: this item is included in nep-env and nep-rmg
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