The Ramsey Rule

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Climate Change ◽  
Discount Rate ◽  
Future Generations ◽  
Rate Of Return ◽  
Inequality Aversion ◽  
Main Argument ◽  
Investment Projects ◽  
Goods And Services ◽  
Growing Economy ◽  
Ramsey Rule

This chapter presents the main argument in favor of a positive discount rate. In a growing economy, future generations will consume more goods and services than we do. In this context, investing for the future is equivalent to asking poor consumers to sacrifice more of their consumption for the benefit for wealthier people. Because of inequality aversion, one would be ready to do so only if the rate of return of these investment projects is large enough to compensate for the increased intertemporal inequalities that these projects would generate. The Ramsey rule quantifies this wealth effect. In fact, several experts have used the Ramsey rule to make recommendations on the choice of the discount rate to evaluate public policies, in particular toward climate change.

The Weitzman Argument

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Discount Rate ◽  
Opportunity Cost ◽  
Net Present Value ◽  
Cost Of Capital ◽  
Cash Flows ◽  
Simple Rule ◽  
Rate Of Return ◽  
Net Benefit ◽  
Investment Projects ◽  
Net Benefits

This chapter examines a model in which the exogeneous rate of return of capital is constant but random. Safe investment projects must be evaluated and implemented before this uncertainty can be fully revealed, i.e., before knowing the opportunity cost of capital. A simple rule of thumb in this context would be to compute the net present value (NPV) for each possible discount rate, and to implement the project if the expected NPV is positive. If the evaluator uses this approach, this is as if one would discount cash flows at a rate that is decreasing with maturity. This approach is implicitly based on the assumptions that the stakeholders are risk-neutral and transfer the net benefits of the project to an increase in immediate consumption. Opposite results prevail if one assumes that the net benefit is consumed at the maturity of the project.

Discounting under Risk

2021 ◽  
pp. 67-89
Author(s):  
Maddalena Ferranna
Keyword(s):  
Climate Change ◽  
Discount Rate ◽  
Public Policies ◽  
Social Discount Rate ◽  
Climate Policies ◽  
The Social ◽  
Ramsey Rule ◽  
Climate Damages

The debate on the economics of climate change has focused primarily on the choice of the social discount rate, which plays a key role in determining the desirability of climate policies given the long-term impacts of climate damages. Discounted utilitarianism and the Ramsey Rule dominate the debate on discounting. The chapter examines the appropriateness of the utilitarian framework for evaluating public policies. More specifically, it focuses on the risky dimension of climate change, and on the failure of utilitarianism in expressing both concerns for the distribution of risks across the population and concerns for the occurrence of catastrophic outcomes. The chapter shows how a shift to the prioritarian paradigm is able to capture those types of concerns, and briefly sketches the main implications for the choice of the social discount rate.

Indian National Strategy for Climate Change Adaptation and Mitigation

2018 ◽  
pp. 541-572
Author(s):  
B. K. Khanna
Keyword(s):  
Climate Change ◽  
Action Plan ◽  
Future Generations ◽  
Ecological Sustainability ◽  
National Strategy ◽  
National Action Plan ◽  
Multilateral Negotiations ◽  
The Status ◽  
Growing Economy ◽  
Adaptation And Mitigation

India is a growing economy and has to sustain its economic growth, despite challenges of climate change. India's vision is to create a prosperous, self-sustaining economy, mindful of responsibilities to both present and future generations. It is committed to engage in multilateral negotiations in the UN Framework Convention on Climate Change (UNFCCC) in a positive, constructive and forward looking manner. India needed to formulate a national strategy to adapt to climate change and to further enhance the ecological sustainability of its development path based on its unique resource endowments, overriding priority of economic and social development and poverty eradication. This chapter explains the principles on which the National Action Plan on Climate Change is based, the approach adopted and provides details of eight missions, which form the core of the National Action Plan. The status of actions taken on each of the eight missions and other initiatives and the way forward has also been elaborated.

Climate Change and Growth

2021 ◽  
pp. 63-108
Author(s):  
Joseph Heath
Keyword(s):  
Climate Change ◽  
Economic Growth ◽  
Anthropogenic Climate Change ◽  
Future Generations ◽  
Standard Of Living ◽  
Course Of Action ◽  
Growing Economy ◽  
The Impact

Many philosophers believe that we owe it to future generations to prevent significant anthropogenic climate change, and yet do not think that we owe them the benefits of a growing economy. The problem with this view is that under all of the most probable scenarios, the benefits that we could be providing to future generations through ongoing economic growth are enormous, relative to the costs that will be imposed upon them by climate change. As a result, if we are under no obligation to maximize growth—indeed, if we are permitted to pass along to future generations an economy that will permit them to achieve a standard of living no greater than what we enjoy now—then by far the least costly course of action for us is to let climate change occur, then compensate future generations for the impact by making resources available to them to cover the costs of adaptation.

Social Investment and Its Discount Rate

2017 ◽  
Author(s):  
Iain Begg
Keyword(s):  
Climate Change ◽  
Discount Rate ◽  
Public Funding ◽  
Rate Of Return ◽  
Social Investment ◽  
Costs And Benefits ◽  
Economic Standpoint ◽  
Over Time

Like any form of investment, social investment will generate a rate of return and will represent a good use of public funding only if that rate of return is high enough compared to alternative uses of the resources. As with assessments of the benefits of action to prevent climate change, it is important to identify the main costs and benefits over time and to take into account the cumulative results of longer-term effects. However, because many of the consequences of social investment only materialize in the longer run, the justification for making social investments will be crucially affected by the discount rate chosen. This chapter examines how social investment can best be assessed from an economic standpoint, drawing attention to aspects that may prove contentious.

Indian National Strategy for Climate Change Adaptation and Mitigation

2017 ◽  
pp. 32-63
Author(s):  
B. K. Khanna
Keyword(s):  
Climate Change ◽  
Action Plan ◽  
Future Generations ◽  
Ecological Sustainability ◽  
National Strategy ◽  
National Action Plan ◽  
Multilateral Negotiations ◽  
The Status ◽  
Growing Economy ◽  
Adaptation And Mitigation

India is a growing economy and has to sustain its economic growth, despite challenges of climate change. India's vision is to create a prosperous, self-sustaining economy, mindful of responsibilities to both present and future generations. It is committed to engage in multilateral negotiations in the UN Framework Convention on Climate Change (UNFCCC) in a positive, constructive and forward looking manner. India needed to formulate a national strategy to adapt to climate change and to further enhance the ecological sustainability of its development path based on its unique resource endowments, overriding priority of economic and social development and poverty eradication. This chapter explains the principles on which the National Action Plan on Climate Change is based, the approach adopted and provides details of eight missions, which form the core of the National Action Plan. The status of actions taken on each of the eight missions and other initiatives and the way forward has also been elaborated.

Extending the Ramsey Rule to an Uncertain Economic Growth

2012 ◽  
Author(s):  
Christian Gollier
Keyword(s):  
Economic Growth ◽  
Discount Rate ◽  
Individual Level ◽  
Investment Projects ◽  
The Future ◽  
Precautionary Motive ◽  
The Individual ◽  
Ramsey Rule

This chapter considers the prospect of uncertainty in planning for the future. In fact, it is commonly accepted that individuals are ready to sacrifice more in the present for the future when this future becomes more uncertain. Keynes was the first to mention this idea by pointing out the precautionary motive for saving. What is desirable at the individual level is also desirable at the collective one. Thus the chapter argues that a society that wants to reinforce the incentive to invest for the future because of its uncertain nature should select a smaller discount rate to evaluate the set of all possible investment projects.

Configurations to Superior Environmental Innovation Strategy: A Both–And Approach

2021 ◽  
pp. 108602662110316
Author(s):  
Tiziana Russo-Spena ◽  
Nadia Di Paola ◽  
Aidan O’Driscoll
Keyword(s):  
Climate Change ◽  
Value Chain ◽  
Critical Role ◽  
Well Being ◽  
Point Of View ◽  
Future Generations ◽  
Innovation Strategy ◽  
Environmental Innovation ◽  
Data Set

An effective climate change action involves the critical role that companies must play in assuring the long-term human and social well-being of future generations. In our study, we offer a more holistic, inclusive, both–and approach to the challenge of environmental innovation (EI) that uses a novel methodology to identify relevant configurations for firms engaging in a superior EI strategy. A conceptual framework is proposed that identifies six sets of driving characteristics of EI and two sets of beneficial outcomes, all inherently tensional. Our analysis utilizes a complementary rather than an oppositional point of view. A data set of 65 companies in the ICT value chain is analyzed via fuzzy-set comparative analysis (fsQCA) and a post-QCA procedure. The results reveal that achieving a superior EI strategy is possible in several scenarios. Specifically, after close examination, two main configuration groups emerge, referred to as technological environmental innovators and organizational environmental innovators.

scholarly journals Coastal green infrastructure to mitigate coastal squeeze

2021 ◽  
Vol 2 (1) ◽  
Author(s):  
Valeria Chávez ◽  
Debora Lithgow ◽  
Miguel Losada ◽  
Rodolfo Silva-Casarin
Keyword(s):  
Climate Change ◽  
Green Infrastructure ◽  
Risk Evaluation ◽  
Good Practices ◽  
Goods And Services ◽  
Natural Processes ◽  
Holistic Management ◽  
Coastal Squeeze ◽  
Key Concepts ◽  
Coastal Risk

AbstractInfrastructure is necessary to protect and provide the goods and services required by humans. As coastal green infrastructure (CGI) aims to respect and work with natural processes, it is a feasible response to mitigate or avoid the consequences of coastal squeeze. The concept of CGI is receiving increased attention of late due to the challenges facing us, such as climate change, population growth and the overexploitation of natural resources on the coast. Terms which may be applied to encourage the construction of infrastructure, or to minimize the responsibility for poorly made decisions, often induce misunderstanding. In this paper, the concept of CGI and its use in solving coastal problems is reordered. Four categories are proposed, according to the degree of naturalness of the project: Nature reclamation, Engineered ecosystems, Ecologically enhanced engineering, and De-engineering/Relocation. Existing coastal risk evaluation frameworks can be used to design many types of CGI. Key concepts, challenges and good practices for the holistic management of coastal squeeze are presented from the analysis of successful and unsuccessful CGI projects worldwide.

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