Irreversibility, ignorance, and the intergenerational equity-efficiency trade-off
Two 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.
References listed on IDEAS
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.:
- Stefan Baumgärtner, 2005. "Temporal and thermodynamic irreversibility in production theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 725-728, October.
- Gerlagh, Reyer & Keyzer, Michiel A., 2001. "Sustainability and the intergenerational distribution of natural resource entitlements," Journal of Public Economics, Elsevier, vol. 79(2), pages 315-341, February.
- J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
- Lawrence F. Katz & Bruce D. Meyer, 1988.
"The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment,"
NBER Working Papers
2741, National Bureau of Economic Research, Inc.
- Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
- Hanemann, W. Michael, 1989. "Information and the concept of option value," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 23-37, January.
- Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December.
- Frank Krysiak, 2009. "Sustainability and its relation to efficiency under uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(2), pages 297-315, November.
- Richard B. Howarth, 1995. "Sustainability under Uncertainty: A Deontological Approach," Land Economics, University of Wisconsin Press, vol. 71(4), pages 417-427.
- Jeffrey A. Krautkraemer & JRaymond G. Batina, 1999. "On Sustainability and Intergenerational Transfers with a Renewable Resource," Land Economics, University of Wisconsin Press, vol. 75(2), pages 167-184.
- Howarth, Richard B & Norgaard, Richard B, 1992. "Environmental Valuation under Sustainable Development," American Economic Review, American Economic Association, vol. 82(2), pages 473-77, May.
When requesting a correction, please mention this item's handle: RePEc:lue:wpaper:198. 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: (Joachim Wagner)
If references are entirely missing, you can add them using this form.