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de Vries, Frans

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Zulehner, Christine / Schirle, Tammy


IMPACT FACTOR 2015: 0.250
5-year IMPACT FACTOR: 0.825

SCImago Journal Rank (SJR) 2015: 0.501
Source Normalized Impact per Paper (SNIP) 2015: 0.418
Impact per Publication (IPP) 2015: 0.455

Online
ISSN
1935-1682
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The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change

Louis Kaplow1 / Elisabeth Moyer2 / David A Weisbach3

1Harvard Law School,

2University of Chicago,

3University of Chicago,

Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 10, Issue 2, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.2519, November 2010

Publication History

Published Online:
2010-11-19

Abstract

Assessment of climate change policies requires aggregation of costs and benefits over time and across generations, a process ordinarily done through discounting. Choosing the correct discount rate has proved to be controversial and highly consequential. To clarify past analysis and guide future work, we decompose discounting along two dimensions. First, we distinguish discounting by individuals, an empirical matter that determines their behavior in models, and discounting by an outside evaluator, an ethical matter involving the choice of a social welfare function. Second, for each type of discounting, we distinguish it due to pure time preference from that attributable to curvature of the pertinent function: utility functions (of consumption) for individuals and the social welfare function (of utilities) for the evaluator. We apply our analysis to leading integrated assessment models used to evaluate climate policies. We find that past work often confounds different sources of discounting, and we offer suggestions for avoiding these difficulties. Finally, we relate the standard intergenerational framework that combines considerations of efficiency and distribution to more familiar modes of analysis that assess most policies in terms of efficiency, leaving distributive concerns to the tax and transfer system.

Keywords: individual discount rate; social discount rate; intergenerational distribution; climate policy; integrated assessment models

Citing Articles

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[1]
Paul S. Chinowsky, Jason C. Price, and James E. Neumann
Global Environmental Change, 2013, Volume 23, Number 4, Page 764
[2]
Robert E. Kopp and Bryan K. Mignone
Economics: The Open-Access, Open-Assessment E-Journal, 2012, Volume 6, Number 2012-15, Page 1

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