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Presidential Address Imperfections in the Economics of Public Policy, Imperfections in Markets, and Climate Change

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  • Nicholas Stern

Abstract

The economics of public policy has suffered from "collective amnesia": we have forgotten or ignored much of the tradition of public policy in imperfect economies whose foundations were laid by James Meade and Paul Samuelson. This has been associated with a period of around two decades from the early 1980s to the early 2000s where the economics of public policy has "bent to political winds" and has fed arguments for government to get out of the way and leave everything to the markets, to self-interest and to self-regulation. This has manifested itself via the choice of models (those which imply, often directly from assumptions, passive government), patterns of teaching (the marginalisation of public economies in imperfect economics) and "compartmentalisation." Examples in climate change where this amnesia has misled include approaches to discounting and the failure to make non-marginal change central to analysis. On the other hand, creative application of modern public economics gives interesting results such as the possibility of making both current and future generations better off and of informed discussion complementing economic instruments. There are strong formal analogies between policy on climate change and on behavioural economics. Indeed, there seems to be great potential in the combination of these two fields. (JEL: A10, A12, D61, D62, D63) (c) 2010 by the European Economic Association.

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  • Nicholas Stern, 2010. "Presidential Address Imperfections in the Economics of Public Policy, Imperfections in Markets, and Climate Change," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 253-288, 04-05.
  • Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:253-288
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    References listed on IDEAS

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    Cited by:

    1. Richard S. J. Tol, 2015. "Economic impacts of climate change," Working Paper Series 7515, Department of Economics, University of Sussex.
    2. Richard S.J. Tol, 2013. "Long live the Kyoto Protocol!," Chapters,in: Handbook on Energy and Climate Change, chapter 14, pages 344-351 Edward Elgar Publishing.
    3. Gerlagh, Reyer & Kverndokk, Snorre & Rosendahl, Knut Einar, 2014. "The optimal time path of clean energy R&D policy when patents have finite lifetime," Journal of Environmental Economics and Management, Elsevier, vol. 67(1), pages 2-19.
    4. Monica Giulietti & Michael Waterson & Matthijs Wildenbeest, 2014. "Estimation of Search Frictions in the British Electricity Market," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 555-590, December.
    5. Markus Pasche, 2013. "What Can be Learned from Behavioural Economics for Environmental Policy?," Jena Economic Research Papers 2013-020, Friedrich-Schiller-University Jena.
    6. Nicholas Stern, 2013. "EEthics, Equity and the Economics of Climate Change. Paper 1: Science and Philosophy," GRI Working Papers 84a, Grantham Research Institute on Climate Change and the Environment.
    7. repec:lsg:lsgwps:wp84 is not listed on IDEAS
    8. Foley, Duncan K. & Rezai, Armon & Taylor, Lance, 2013. "The social cost of carbon emissions: Seven propositions," Economics Letters, Elsevier, vol. 121(1), pages 90-97.
    9. Zhao, Xiaoli & Yin, Haitao, 2011. "Industrial relocation and energy consumption: Evidence from China," Energy Policy, Elsevier, vol. 39(5), pages 2944-2956, May.
    10. Francesc Trillas Jané, 2016. "Behavioral Regulatory Agencies," Working Papers wpdea1606, Department of Applied Economics at Universitat Autonoma of Barcelona.
    11. Armon Rezai, 2011. "The Opportunity Cost of Climate Policy: A Question of Reference," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 885-903, December.

    More about this item

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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