Discounting Climate Change

Partha Dasgupta

No 11, Working papers from The South Asian Network for Development and Environmental Economics

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.

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. (search for similar items in EconPapers)
JEL-codes: C61 D53 D9 G12 (search for similar items in EconPapers)
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sandeeonline.org/uploads/documents/publ ... working_paper_33.pdf
http://www.sandeeonline.org/uploads/documents/abst ... tABS:application/pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
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:snd:wpaper:11

Access Statistics for this paper

More papers in Working papers from The South Asian Network for Development and Environmental Economics South Asian Network for Development and Environmental Economics PO Box: 8975, EPC: 1056 Kathmandu, Nepal.
Bibliographic data for series maintained by Anuradhak ( this e-mail address is bad, please contact ).