Irreversibility, ignorance, and the intergenerational equity-efficiency trade-off
AbstractTwo 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 sustainability problems and policy: (i) temporal irreversibility, i.e. the inability to revise one’s past actions; and (ii) unawareness of future consequences of present actions in human-environment systems (“unknown unknowns”). If initially unknown sustainability problems become apparent and policy is enacted after irreversible actions were taken, policy-making faces a fundamental trade-off between Pareto-efficiency and sustainability.
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Bibliographic InfoPaper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 198.
Length: 30 pages
Date of creation: Feb 2011
Date of revision:
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Web page: http://leuphana.de/institute/ivwl.html
climate change; closed ignorance; intergenerational equity-efficiency tradeoff; irreversibility; Pareto-efficiency; sustainability; unawareness;
Find related papers by JEL classification:
- D3 - Microeconomics - - Distribution
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-ENE-2012-03-08 (Energy Economics)
- NEP-ENV-2012-03-08 (Environmental Economics)
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