Advertisement

Climatic Change

, Volume 105, Issue 1–2, pp 109–127 | Cite as

Consumption tradeoff vs. catastrophes avoidance: implications of some recent results in happiness studies on the economics of climate change

  • Yew-Kwang Ng
Article

Abstract

Recent discussion of climate change focuses on the trade-off between present and future consumption and hence correctly emphasizes the discount rate. Stern (2007) favours immediate and strong actions of environmental protection, but this has been questioned as the discount rate used is much lower than the market or commonly used rates. Focussed only on consumption trade-off, the use of these higher discount rates completely reverses the need for strong actions. However, an even more important problem has been largely neglected. This is the avoidance of catastrophes that may threaten the extinction of the human species. But “we lack a usable economic framework for dealing with these kinds of ... extreme disasters’ (Weitzman, J Econ Lit 45(3):703–724, 2007, p. 723). To analyse this, the comparison of marginal utility with total utility is needed. As happiness studies suggest a low ratio of marginal to total utility and as scientific and technological advances (especially in brain stimulation and genetic engineering) may dramatically increase future welfare, immediate and actions stronger than proposed by Stern may be justified despite high discount rates on future consumption, as discount rates on future utility/welfare should be much lower.

Keywords

Discount Rate Brain Stimulation Marginal Utility Expected Utility Catastrophe Prevention 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Azar C, Schneider SH (2002) Are the economic costs of stabilising the atmosphere prohibitive? Ecol Econ 42:73–80CrossRefGoogle Scholar
  2. Barker T (2008) The economics of avoiding dangerous climate change. An editorial essay on The Stern Review. Clim Change 89(3–4):173–194CrossRefGoogle Scholar
  3. Bostrom N (2002) Existential risks: analyzing human extinction scenarios and related hazards. J Evol Technology, vol 9Google Scholar
  4. Clark AE, Frijters P, Shields MA (2008) Relative income, happiness, and utility: an explanation for the Easterlin paradox and other puzzles. J Econ Lit 46(1):95–144CrossRefGoogle Scholar
  5. Di Tella R, Macculloch R (2006) Some uses of happiness data in economics. J Econ Perspect 20(1):25–46CrossRefGoogle Scholar
  6. Dietz S, Stern N (2008) Why economic analysis supports strong action on climate change: a response to the Stern Review’s critics. Rev Environ Economics Policy 2:94–113CrossRefGoogle Scholar
  7. Easterlin RA (1974) Does economic growth improve the human lot? Some empirical evidence. In: David PA, Reder MW (eds) Nations and households in economic growth: essays in honour of Moses Abramowitz. Academic Press, New YorkGoogle Scholar
  8. Easterlin RA (2002) Happiness in economics. Edward Elgar, CheltenhamGoogle Scholar
  9. Frey BS, Stutzer A (2002) Happiness and economics: how the economy and institutions affect well-being. Princeton University Press, PrincetonGoogle Scholar
  10. Heal G (2009) Climate economics: a meta-review and some suggestions for future research. Rev Environ Economics Policy 3(1):4–21CrossRefGoogle Scholar
  11. Inglehart R, Klingemann H-D (2000) Subjective well-being by level of economic development. In: Genes, culture and happiness. MIT Press, CambridgeGoogle Scholar
  12. Jaeger C, Schellnhuber HJ, Brovkin V (2008) Stern’s review and Adam’s fallacy. Clim Change 89(3–4):207–218CrossRefGoogle Scholar
  13. Kahneman D, Krueger AB (2006) Developments in the measurement of subjective well-being. J Econ Perspect 20(1):3–24CrossRefGoogle Scholar
  14. Layard R (2005) Happiness: lessons from a new science. Penguin Press, New YorkGoogle Scholar
  15. Lykken DT (1999) Happiness: what studies on twins show us about nature, nurture, and the happiness set point. Golden Books, New YorkGoogle Scholar
  16. Lykken DT, Tellegen A (1996) Happiness is a stochastic phenomenon. Psychol Sci 7:186–189CrossRefGoogle Scholar
  17. Matheny JG (2007) Reducing the risk of human extinction. Risk Anal 27(5):1335–1344CrossRefGoogle Scholar
  18. Mendelsohn R (2008) Is the Stern Review an economic analysis? Rev Environ Econ Policy 2(1):45–60CrossRefGoogle Scholar
  19. Ng Y-K (1984) Expected subjective utility: is the Neumann-Morgenstern utility the same as the Neoclassical’s? Soc Choice Welf 1:177–186CrossRefGoogle Scholar
  20. Ng Y-K (1989) What should we do about future generations? The impossibility of Parfit’s theory X. Econ Philos 5:135–253CrossRefGoogle Scholar
  21. Ng Y-K (1991) Should we be very cautious or extremely cautious on measures that may involve our destruction? On the finiteness of our expected welfare. Soc Choice Welf 8(1):79–88CrossRefGoogle Scholar
  22. Ng Y-K (1995) Towards welfare biology: evolutionary economics of animal consciousness and suffering. Biol Philos 10(3):255–285CrossRefGoogle Scholar
  23. Ng Y-K (1996) Happiness surveys: some comparability issues and an exploratory survey based on just perceivable increments. Soc Indic Res 38(1):1–29CrossRefGoogle Scholar
  24. Ng Y-K (1999) Utility, informed preference, or happiness? Soc Choice Welf 16(2):197–216CrossRefGoogle Scholar
  25. Ng Y-K (2003) From preference to happiness: towards a more complete welfare economics. Soc Choice Welf 20:307–50CrossRefGoogle Scholar
  26. Ng Y-K (2005) Intergenerational impartiality: replacing discounting by probability weighting. J Agric Environ Ethics 18(3):237–57CrossRefGoogle Scholar
  27. Ng Y-K (2008) Happiness studies: ways to improve comparability and some public policy implications. Econ Rec 84:253–266CrossRefGoogle Scholar
  28. Nordhaus WD (1994) Managing the global commons: the economics of climate change. MIT, CambridgeGoogle Scholar
  29. Nordhaus WD (2007) A review of the Stern Review on the economics of climate change. J Econ Lit 45(3):686–702CrossRefGoogle Scholar
  30. Olds J, Milner P (1954) Positive reinforcement produced by electrical stimulation of septal area and other regions of the rat brain. J Comp Physiol Psychol 47:419–427CrossRefGoogle Scholar
  31. Quiggin J (2008) Stern and his critics on discounting and climate change: an editorial essay. Clim Change 89(3–4):195–205CrossRefGoogle Scholar
  32. Raup DM (1992) Extinction: bad genes or bad luck. NortonGoogle Scholar
  33. Stern N (2007) The economics of climate change: the Stern Review. Cambridge University Press, CambridgeGoogle Scholar
  34. Sterner T, Persson UM (2008) An even Sterner review: introducing relative prices into the discounting debate. Rev Environ Econ Policy 2:61–76CrossRefGoogle Scholar
  35. Weitzman ML (2007) A review of the Stern Review on the economics of climate change. J Econ Lit 45(3):703–724CrossRefGoogle Scholar
  36. Weitzman ML (2009) On modelling and interpreting the economics of climate change. Rev Econ Stat 91(1):1–19CrossRefGoogle Scholar
  37. Yohe GW (2006) Some thoughts on the damage estimates presented in the Stern Review—an editorial. Integr Assess J 6(3):65–72Google Scholar
  38. Yohe GW, Tol RSJ (2008) The Stern Review and the economics of climate change: an editorial essay. Clim Change 89:231–240CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Monash UniversityClaytonAustralia

Personalised recommendations