From the St. Petersburg paradox to the dismal theorem

2020 ◽  
Vol 25 (5) ◽  
pp. 423-432
Author(s):  
Susumu Cato
Keyword(s):  
Climate Change ◽  
Probability Distribution ◽  
Significant Influence ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Benefit Analysis ◽  
Discrete Probability ◽  
Discrete Probability Distribution ◽  
Standard Cost ◽  
Petersburg Paradox

AbstractThis paper aims to consider the meaning of the dismal theorem, as presented by Martin Weitzman [(2009) On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics91, 1–19]. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates regarding the economics of climate change. In this study, we present an intuitive similarity between the dismal theorem and the St. Petersburg paradox using a simple discrete probability distribution.

Rear Visibility and Some Unresolved Problems for Economic Analysis (With Notes on Experience Goods)

2019 ◽  
Vol 10 (3) ◽  
pp. 317-350 ◽  
Author(s):  
Cass R. Sunstein
Keyword(s):  
Traffic Safety ◽  
Market Failure ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Benefit Analysis ◽  
Highway Traffic ◽  
Experience Goods ◽  
National Highway Traffic Safety ◽  
Standard Cost ◽  
Regulatory Law

AbstractIn 2014, the National Highway Traffic Safety Administration finalized its rear visibility regulation, which requires cameras in all new vehicles, with the goal of allowing drivers to see what is behind them and thus reducing backover accidents. In 2018, the Trump administration embraced the regulation. The rear visibility rule raises numerous puzzles. First, Congress’ grant of authority was essentially standardless – perhaps the most open-ended in all of federal regulatory law. Second, it is not easy to identify a market failure to justify the regulation. Third, the monetized costs of the regulation greatly exceeded the monetized benefits, and yet on welfare grounds, the regulation can plausibly be counted as a significant success. Rearview cameras produce a set of benefits that are hard to quantify, including increased ease of driving, and those benefits might have been made a part of “breakeven analysis,” accompanying standard cost-benefit analysis. In addition, rearview cameras significantly improve the experience of driving, and it is plausible to think that in deciding whether to demand them, many vehicle purchasers did not sufficiently anticipate that improvement. This is a problem of limited foresight; rearview cameras are “experience goods.” A survey conducted in 2019 strongly supports this proposition, finding that about 56 % of consumers would demand at least $300 to buy a car without a rearview camera, and that fewer than 6 % would demand $50 or less. Almost all of that 6 % consists of people who do not own a car with a rearview camera. (The per-person cost is usually under $50.) These conclusions have general implications for other domains in which regulation has the potential to improve social welfare, even if it fails standard cost-benefit analysis; the defining category involves situations in which people lack experience with a good whose provision might have highly beneficial welfare effects.

Economic cost benefit analysis of climate change adaptation for infrastructure

2011 ◽  
Vol 51 (2) ◽  
pp. 687
Author(s):  
Michael Nolan
Keyword(s):  
Climate Change ◽  
Water Supply ◽  
Climate Adaptation ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Climate Change Impacts ◽  
Economic Cost ◽  
Economic Modelling ◽  
Benefit Analysis ◽  
Lessons Learnt

This paper explores the lessons learnt from the Optimising Adaptation Investment projects for the Department of Climate Change and Energy Efficiency–it includes coastal settlements, water supply and rail infrastructure case studies. These projects are the first of their kind in Australia and are considered internationally as a leading example of economic cost benefit analysis. They have been used effectively to inform decision making on specific adaptation responses to climate change risks to existing and new infrastructure. The lessons learnt will be explored for offshore platforms, ports, rail, road, drainage, tailings dams, mine facilities, water, and power supply, which includes the following elements: What decision makers require to make informed decisions under the uncertainty of climate change impacts. Reducing the uncertainty through economic modelling and cost benefit analysis. Optimising the right timing and scale of various adaptation options. Benefiting from oil and gas infrastructure adaptation opportunities. To further support the elements above, the applied process for integrating climate adaptation into infrastructure planning, design and operation will be illustrated by AECOM project experiences. AECOM has completed more than 60 significant climate change risk and adaptation projects for mines, ports, water supply and treatment, energy generation, transmission and distribution, rail, road, and coastal settlements in Australia, including the report: Climate Change Impacts to Infrastructure in Australia for the Garnaut Climate Change Review.

scholarly journals SOCIAL AND PRIVATE PROFITABILITY OF TREE-BASED ADAPTATION OPTIONS TO CLIMATE CHANGE IN A DRYLAND AREA OF TUNISIA

New Medit ◽  
2019 ◽  
Vol 18 (2) ◽  
pp. 89-104
Author(s):  
Hamed Daly-Hassen ◽  
Mohamed Annabi ◽  
Caroline King-Okumu
Keyword(s):  
Climate Change ◽  
Social Cost ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Olive Tree ◽  
Benefit Analysis ◽  
Tree Plantation ◽  
Agricultural Water Use ◽  
The Social ◽  
Olive Trees

Climate change exacerbates the effects of water scarcity on livelihoods. Governments can intervene by structuring incentives for agricultural adaptations so that farmers can choose the ones that create more benefits for the society as a whole. This requires consideration of a range of different benefits to different groups within the social cost-benefit analysis (CBA). We assess the social and private profitability of two alternative tree-based adaptation techniques that have received state support in the traditional barley cropping/rangeland systems in Central Tunisia: olive tree plantation, and intercropping with cactus. The results showed that society does not benefit from offering incentives for olive production. The production of irrigated olive trees without incentives is profitable for farmers and for society, while rainfed plantation is not profitable at all. However, it is possible for farmers to increase their incomes without increasing agricultural water use if they are encouraged to adopt intercropping with cactus to supplement livestock food and watering. The findings highlight scope for policies to balance between returns both for society, and for farmers, as revealed through the application of quantitative social CBA.

scholarly journals Economic analysis of ecosystem based adaptation and engineering options: A case study from Udayapur, Nepal

2015 ◽  
Vol 3 ◽  
pp. 35-42
Author(s):  
Dinesh Chandra Devkota ◽  
Kamal Thapa ◽  
Bhaskar Kharki
Keyword(s):  
Climate Change ◽  
Ecosystem Services ◽  
Economic Analysis ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Well Being ◽  
Benefit Analysis ◽  
High Benefit ◽  
Adaptation Options

Ecosystem services are vital to our well-being as they directly or indirectly support our survival and quality of life. But, the growing impact of climate change diminishes the benefit from ecosystem services. Therefore, identifying possible applicable adaptation options are inevitable to reduce the effect of climate change. The present research is based on a case study of Ksedi River watershed, Ajgada Village in Udaypur district of Nepal. The study demonstrates the comparison between different options to deal with flood and make a sound decision, based on economic rationale for long-term benefits. The present study compares ecosystem based adaptation options with engineering options using cost benefit analysis in order to protect village from flooding. Through stakeholder and expert consultations, ecosystem based adaptation options and economic options that are feasible in the village and catchment to mitigate the floods were listed. Economic analysis of these options and the different combinations were done using cost benefit analysis. Analysis was carried out for each of the different combination of options. Focus on ecosystem based adaptation options provide high benefit to cost return in terms of avoided damages and considering engineering options efficient in flood and erosion control in initial stage in spite of its high cost. The study suggests that reforestation in upland forest areas; plantation along riverbed and management of rangeland should be prioritized. Similarly, preparation of flood model, flood height damage curve and flood vulnerable maps specific to the site will help decision makers to implement site specific adaptation options.

Farmers’ perception, adaptation to groundwater salinity, and climate change vulnerability: insights from North India

2021 ◽  
Author(s):  
Susmita Mitra ◽  
Pradeep K. Mehta ◽  
Sudipta Kumar Mishra
Keyword(s):  
Climate Change ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Local Context ◽  
Groundwater Salinity ◽  
Benefit Analysis ◽  
Adaptation Measures ◽  
Successful Adaptation ◽  
Perceived Impacts ◽  
Negative Impacts

AbstractGroundwater salinity, caused by over-extraction and aggravated by climate change, negatively affects crop productivity and threatens global food security. Poor farmers are vulnerable due to low adaptive capacity. A better understanding of their perceptions and adaptation is important to inform policies for successful adaptation. This paper represents an important study by exploring the same in Mewat, a salinity-affected socioeconomically backward district of northern India. The study uses a mixed-method approach with both secondary data and a primary survey of 250 farmers. A large number of farmers perceived negative impacts on water, crop, income, and assets; and adapt in various ways like water management, crop, and land management, livelihood diversification, and shift towards surface water irrigation. Perceived impacts differed between richer and poorer farmers, whereas adaptation measures varied across the educational, social, and economic backgrounds of farmers. Lack of awareness, education, skill development, and livelihood-opportunities are found to be hindrances, whereas institutional and infrastructural support as facilitators of adaptation. Comparing the findings with global experiences we argued that developed countries intervene more in the policy level and infrastructure, whereas in developing countries, adaptation strategies are local, context-specific, and low-cost. The insights from our study will be useful for intervention in Mewat and similar areas across the developing world. We further argue that farmers take adaptation decisions based on perceived impacts and cost-benefit analysis. Therefore, future research work on quantifying the negative impacts and cost-benefit analysis of various adaptation measures will be useful to ensure successful adaptation in the region and beyond.

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