Positional goods, climate change and the social returns to investment
The economic analysis of global warming is dominated by models based on optimal growth theory. This approach can generate biases in the presence of positional goods and status effects. We show that by ignoring these direct consumption externalities, integrated assessment models overestimate the social return to conventional investment and underestimate the optimal amount of investment in mitigation. Empirical evidence on the influence of relative consumption on utility suggests that the bias could be quantitatively significant. Our results from a simple survey support this conclusion. JEL Categories: Q13, I3, E1
|Date of creation:||Oct 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Thompson Hall, Amherst, MA 01003|
Web page: http://www.umass.edu/economics
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.:
- Erzo F.P. Luttmer, 2004.
"Neighbors as Negatives: Relative Earnings and Well-Being,"
NBER Working Papers
10667, National Bureau of Economic Research, Inc.
- Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
- Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
- 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.
- David G. Blanchflower & Andrew J. Oswald, 2000.
"Well-Being Over Time in Britain and the USA,"
NBER Working Papers
7487, National Bureau of Economic Research, Inc.
- Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
- Ackerman, Frank & Stanton, Elizabeth A. & Bueno, Ramón, 2013.
"CRED: A new model of climate and development,"
Elsevier, vol. 85(C), pages 166-176.
- Olivier J. Blanchard, 2008.
"The State of Macro,"
NBER Working Papers
14259, National Bureau of Economic Research, Inc.
- Fafchamps, Marcel & Shilpi, Forhad, 2008.
"Subjective welfare, isolation, and relative consumption,"
Journal of Development Economics,
Elsevier, vol. 86(1), pages 43-60, April.
- Marcel Fafchamps & Forhad Shilpi, 2006. "Subjective Welfare, Isolation, and Relative Consumption," Economics Series Working Papers GPRG-WPS-056, University of Oxford, Department of Economics.
- Fafchamps, Marcel & Shilpi, Forhad, 2006. "Subjective Welfare, Isolation and Relative Consumption," CEPR Discussion Papers 6002, C.E.P.R. Discussion Papers.
- Armon Rezai & Duncan Foley & Lance Taylor, 2012. "Global warming and economic externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 329-351, February.
- Thomas R. Michl, 2008.
wp158, Political Economy Research Institute, University of Massachusetts at Amherst.
- William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
- Ng, Y.K. & Wang, J., 1993. "A Case for Cardinal Utility and Aritrary Choice of Commodity Units," Papers 93-26, New South Wales - School of Economics.
- Richard Howarth, 2000. "Climate Change and the Representative Agent," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 135-148, February.
- William D. Nordhaus, 2006. "Principles of National Accounting For Nonmarket Accounts," NBER Chapters, in: A New Architecture for the U.S. National Accounts, pages 143-160 National Bureau of Economic Research, Inc.
- Dale Jorgenson & J. Steven Landefeld & William D. Nordhaus, 2006. "A New Architecture for the U.S. National Accounts," NBER Books, National Bureau of Economic Research, Inc, number jorg06-1, September.
When requesting a correction, please mention this item's handle: RePEc:ums:papers:2011-24. 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: (Daniele Girardi)
If references are entirely missing, you can add them using this form.