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BY 4.0 license Open Access Published by De Gruyter Open Access April 9, 2009

Now or Never: Environmental Protection under Hyperbolic Discounting

Ralph Winkler EMAIL logo
From the journal Economics

Abstract

The author analyzes the optimal investment in environmental protection in a model of non-overlapping hyperbolically discounting agents. He shows that, in the long run and in the absence of a commitment device, society is stuck in a situation where all agents prefer further investments, yet no agent invests. This holds no matter whether agents are aware of the time inconsistency of their preferences. As a consequence, awareness of the time-inconsistency problem poses at best a short run remedy. Moreover, such an outcome may be Pareto inefficient and may explain the weak performance of long-run environmental policies.

JEL Classification: D90; Q50; Q58

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Published Online: 2009-04-09
Published in Print: 2009-12-01

© 2009 Ralph Winkler, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

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