Wednesday, September 4, 2013

When generations disagree on the environment

Many ecosystems feature thresholds beyond which they tip over, in some cases irremediably. The dynamics are, however, so complex that it is sometimes anybody's guess where this threshold is. But this can be dealt with in an infinite-horizon model, and an optimal schedule of, say, pollution can be determined.

Thomas Michielsen shows, however, that this breaks down once you consider successive generations, as in some sense they disagree on the discount rate. Any generation is willing to have a little more pollution and have future generations bear the cost of either reducing pollution or the risk of the ecological catastrophe. And this time inconsistency leads to an increase of the likelihood of the tipping point happening earlier. How can you prevent this? Michielsen suggests to keep the stock of pollution at its current level, as it is known to be safe. That seems drastic. I would prefer to keep pollution at the dynastic model outcome, but it is indeed difficult to see how generations could commit to such levels.

PS: FEEM needs to stop immediately with these multicolored abstracts. They are absolutely horrible.

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