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The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models

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  • Nicholas Stern
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    Abstract

    Scientists describe the scale of the risks from unmanaged climate change as potentially immense. However, the scientific models, because they omit key factors that are hard to capture precisely, appear to substantially underestimate these risks. Many economic models add further gross underassessment of risk because the assumptions built into the economic modeling on growth, damages and risks, come close to assuming directly that the impacts and costs will be modest and close to excluding the possibility of catastrophic outcomes. A new generation of models is needed in all three of climate science, impact and economics with a still stronger focus on lives and livelihoods, including the risks of large-scale migration and conflicts.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.51.3.838
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Literature.

    Volume (Year): 51 (2013)
    Issue (Month): 3 (September)
    Pages: 838-59

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    Handle: RePEc:aea:jeclit:v:51:y:2013:i:3:p:838-59

    Note: DOI: 10.1257/jel.51.3.838
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    Cited by:
    1. Nicholas Stern, 2013. "EEthics, Equity and the Economics of Climate Change. Paper 1: Science and Philosophy," Grantham Research Institute on Climate Change and the Environment Working Papers 84a, Grantham Research Institute on Climate Change and the Environment.
    2. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-72, September.
    3. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 424-79, June.
    4. Nicholas Stern, 2013. "Ethics, equity and the economics of climate change. Paper 2: Economics and Politics," Grantham Research Institute on Climate Change and the Environment Working Papers 84b, Grantham Research Institute on Climate Change and the Environment.
    5. Ted Temzelides & Borghan Narajabad, 2014. "Robust Dynamic Optimal Taxation and Environmental Externalities," 2014 Meeting Papers 59, Society for Economic Dynamics.
    6. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
    7. Cass R. Sunstein, 2014. "On Not Revisiting Official Discount Rates: Institutional Inertia and the Social Cost of Carbon," American Economic Review, American Economic Association, vol. 104(5), pages 547-51, May.
    8. Yingying Lu & David I. Stern, 2014. "Substitutability and the Cost of Climate Mitigation Policy," CAMA Working Papers 2014-28, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2013. "What Do We Learn from the Weather? The New Climate-Economy Literature," NBER Working Papers 19578, National Bureau of Economic Research, Inc.

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