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Ambiguity and the economic rhetoric of climate change
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Chambers, Robert G. and Melkonyan, Tigran A. (2017) Ambiguity and the economic rhetoric of climate change. Journal of Environmental Economics and Management, 81 . pp. 74-92. doi:10.1016/j.jeem.2016.09.007
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Official URL: http://dx.doi.org/10.1016/j.jeem.2016.09.007
Abstract
This paper examines climate-change benefit-cost analysis in the presence of scientific uncertainty in the form of ambiguity. The specific issue addressed is the robustness of benefit-cost analyses of climate-change policy alternatives to relaxation of Savage's original axioms. Two alternatives to subjective expected utility (SEU) are considered: maximin expected utility (MEU) and incomplete expected utility (IEU). Among other results, it is demonstrated that polar opposite recommendations can emerge in an ambiguous decision setting even if all agree on Society's rate of time preference, Society's risk attitudes, the degree of ambiguity faced, and the scientific primitives. We show that, for a simple numerical simulation of our model, an MEU decision maker favors policies which immediately tackle climate change while an IEU decision prefers "business as usual".
| Item Type: | Journal Article | ||||||||||
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| Subjects: | H Social Sciences > HC Economic History and Conditions | ||||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Climatic changes -- Economic aspects -- Mathematical models, Climate change mitigation -- Cost effectiveness, Intergovernmental Panel on Climate Change -- Influence, Environmental policy | ||||||||||
| Journal or Publication Title: | Journal of Environmental Economics and Management | ||||||||||
| Publisher: | Elsevier | ||||||||||
| ISSN: | 0095-0696 | ||||||||||
| Official Date: | 1 January 2017 | ||||||||||
| Dates: |
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| Volume: | 81 | ||||||||||
| Page Range: | pp. 74-92 | ||||||||||
| DOI: | 10.1016/j.jeem.2016.09.007 | ||||||||||
| Status: | Peer Reviewed | ||||||||||
| Publication Status: | Published | ||||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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