The Economics of the Climate†

The Economics of the Climate† AbstractI review the economic characteristics of the climate problem, focusing on the choice of discount rates in the presence of a stock externality, risk and uncertainty/ambiguity, and the role of integrated assessment models (IAMs) in analyzing policy choices. I suggest that IAMs can play a role in providing qualitative understanding of how complex systems behave, but are not accurate enough to provide quantitative insights. Arguments in favor of action on climate issues have to be based on aversion to risk and ambiguity and the need to avoid a small but positive risk of a disastrous outcome. ( JEL D61, H43, Q48, Q54, Q58) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Literature American Economic Association

The Economics of the Climate†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
0022-0515
D.O.I.
10.1257/jel.20151335
Publisher site
See Article on Publisher Site

Abstract

AbstractI review the economic characteristics of the climate problem, focusing on the choice of discount rates in the presence of a stock externality, risk and uncertainty/ambiguity, and the role of integrated assessment models (IAMs) in analyzing policy choices. I suggest that IAMs can play a role in providing qualitative understanding of how complex systems behave, but are not accurate enough to provide quantitative insights. Arguments in favor of action on climate issues have to be based on aversion to risk and ambiguity and the need to avoid a small but positive risk of a disastrous outcome. ( JEL D61, H43, Q48, Q54, Q58)

Journal

Journal of Economic LiteratureAmerican Economic Association

Published: Sep 1, 2017

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