The Worst-Case Scenario and Discounting the Very Long Term
AbstractWe propose an ethical viewpoint based on the possibility of the realization of the worst-case scenario in order to reduce future generations risks in terms of discounting. Applied to the question of conservation of a renewable resource, we show that an economy, where the social planner takes into account the possibility that at an uncertain date the discount rate could change to its minimum possible value, could lead to a better conservation of the resource and modify the position of the sacrificed generations. Finally, our model suggests to apply the lowest possible discount rate immediately for long term environmental projects.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v06005.
Length: 13 pages
Date of creation: Jan 2006
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Discounting; environment; uncertainty; preservation of natural resources; intergenerational equity.;
Find related papers by JEL classification:
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
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