This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Discounting Nordhaus

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Thomas R. Michl
Abstract

This paper evaluates Nordhaus’s neoclassical complaints about the Stern Review from the vantage point of classical growth theory. Nordhaus argues that the Stern Review exaggerates the effects of global warming because it uses a discount rate that is well below the market rate of return on capital. From the perspective of classical growth theory, Nordhaus’s belief in choosing preference parameters for the social planner based on observed market rates of return filtered through the Ramsey equation is equivalent to assigning the preferences of the capitalist agents to the social planner. This equivalence is an implication of the Cambridge Theorem, which interprets the Ramsey equation as the saving function of the capitalist agents. The classical theory of growth interprets the market return to capital as a reflection of the property relations of capitalist society that does not offer the social planner any information that would be useful in resolving the problem of global warming. Contrary to the viewpoint of neoclassical economic theory, the market return to capital offers no information about preferences for the social welfare function or about the putative “marginal product” of conventional capital.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_151-200/WP158.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp158.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:uma:periwp:wp158

Contact details of provider:
Postal: 418 N Pleasant St, Amherst MA 01002
Phone: (413) 545-6355
Fax: (413) 545-2921
Email:
Web page: http://www.peri.umass.edu/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Judy Fogg).

Related research
Keywords: Global warming; Stern Review; Discounting; Ramsey equation; Cambridge equation; Cambridge Theorem;

Find related papers by JEL classification:
Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

This paper has been announced in the following NEP Reports:

Statistics
Access and download statistics

Did you know? IDEAS also indexes books.

This page was last updated on 2009-12-23.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.