A balance of questions: what can we ask of climate change economics?
The standard approach to the economics of climate change, which has its best known implementation in Nordhaus's DICE and RICE models (well described in Nordhaus's 2008 book, A Question of Balance) is not well equipped to deal with the possibility of catastrophe, since we are unable to evaluate a risk averse representative agent's expected utility when there is any significant probability of zero consumption. Whilst other authors attempt to develop new tools with which to address these problems, the simple solution proposed in this paper is to ask a question that the currently available tools of climate change economics are capable of answering. Rather than having agents optimally choosing a path (that divers from the recommendations of climate scientists) within models which cannot capture the essential features of the problem, I argue that economic models should be used to determine the savings and investment paths which implement climate targets that have been suggested in the physical science literature.
|Date of creation:||Jan 2013|
|Contact details of provider:|| Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh|
Web page: http://www.econ.ed.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Masako Ikefuji & Roger Laeven & Jan Magnus & Chris Muris, 2014. "Expected Utility and Catastrophic Risk," Tinbergen Institute Discussion Papers 14-133/III, Tinbergen Institute.
- Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
- Per Krusell & Conny Olovsson & John Hassler, 2011. "Directed Energy-Saving Technical Change," 2011 Meeting Papers 1055, Society for Economic Dynamics.
- Millner, Antony, 2013. "On welfare frameworks and catastrophic climate risks," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 310-325.
- Martin L. Weitzman, 2009.
"On Modeling and Interpreting the Economics of Catastrophic Climate Change,"
The Review of Economics and Statistics,
MIT Press, vol. 91(1), pages 1-19, February.
- Weitzman, Martin L., 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," Scholarly Articles 3693423, Harvard University Department of Economics.
- Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, 01.
- Golosov, Mikhail & Hassler, John & Krusell, Per & Tsyvinski, Aleh, 2011. "Optimal taxes on fossil fuel in general equilibrium," CEPR Discussion Papers 8527, C.E.P.R. Discussion Papers.
- Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2011. "Optimal Taxes on Fossil Fuel in General Equilibrium," NBER Working Papers 17348, National Bureau of Economic Research, Inc.
- Masako Ikefuji & Roger J. A. Laeven & Jan R. Magnus & Chris Muris, 2011. "Weitzman meets Nordhaus: Expected utility and catastrophic risk in a stochastic economy-climate model," ISER Discussion Paper 0825, Institute of Social and Economic Research, Osaka University. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:edn:esedps:216. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hannah Chater)
If references are entirely missing, you can add them using this form.