The Economics of the Climate | Zendy

Geoffrey Heal | Zendy

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The Economics of the Climate

Author(s) -

Geoffrey Heal

Publication year - 2017

Publication title -

journal of economic literature

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 11.771

H-Index - 160

eISSN - 1547-1101

pISSN - 0022-0515

DOI - 10.1257/jel.20151335

Subject(s) - ambiguity , economics , externality , ambiguity aversion , stock (firearms) , outcome (game theory) , action (physics) , climate change , risk aversion (psychology) , expected utility hypothesis , natural resource economics , microeconomics , public economics , financial economics , computer science , ecology , geography , physics , archaeology , quantum mechanics , biology , programming language

I 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.

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