Cost-Benefit Paralysis
Cost-Benefit Paralysis
This chapter sketches some serious disputes between rival economic analyses of climate change. Such disputes result in vastly different policy recommendations, and involve serious differences in fundamental assumptions. The chapter argues that, contrary to initial appearances, these differences do not reflect narrow technical issues within economic theory, but rather deep ethical claims that fill fundamental gaps in that theory. Moreover, it claims that the most common recent arguments do not fill these gaps, and neither does the (perhaps heroic) claim that some appropriate kind of economic modeling must in principle be possible. While this does not mean that good climate economics is not worth pursuing, it does suggest that we are far from the position where we can confidently rely on such analysis when deciding how to shape the future of the planet.
Keywords: climate economics, cost-benefit analysis, social discount rate, discounting, declining discount rates, Stern Review, William Nordhaus, Bjorn Lomborg, devil's in the details argument, substitutability
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