Uncertainty in Environmental Economics
By Robert S. Pindyck. Review of Environmental Economics and Policy, 2007
322 citations recorded by the source corpus.
In a world of certainty, the design of environmental policy is relatively straightforward, and boils down to maximizing the present value of the flow of social benefits minus costs. But the real world is one of considerable uncertainty—over the physical and ecological impact of pollution, over the economic costs and benefits of reducing it, and over the discount rates that should be used to compute present values. The implications of uncertainty are complicated by the fact that most environmental policy problems involve highly nonlinear damage functions, important irreversibilities, and long time horizons. Incorporating uncertainty correctly into policy design is therefore one of the more interesting and important research areas in environmental economics. This paper offers no easy formulas or solutions for treating uncertainty—to my knowledge, none exist. Instead, I try to clarify the ways in which various kinds of uncertainties will affect optimal policy design, and summarize what we know and don't know about the problem.
Subfields: Economics and Econometrics, Management, Monitoring, Policy and Law, Ocean Engineering
View Paper: https://www.semanticscholar.org/paper/ab7efe0191be78fced56e79b2cb13a938e50b04a
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In Economics and Econometrics
- Antony Millner
- Geoffrey M. Heal
- Robert S. Pindyck
- G. Atkinson
- S. Mourato
- Richard S. J. Tol
- Charles Perrings
- John P. Weyant
In Management, Monitoring, Policy and Law
In Ocean Engineering
Citations in the corpus
- Reflections Uncertainty and Decision Making in Climate Change Economics (2014, background): “These include Heal and Kristrom (2002) and Pindyck (2007), as well as a 2011 symposium in this journal (Nordhaus 2011; Pindyck 2011; Weitzman 2011) that examined some of the questions raised by fat-tailed probabilities of climate catastrophes.1 These reviews focus on issues that have become the…”
- Environmental Cost-Benefit Analysis (2008, background): “In environmental economics, this is mostly known as quasi-option value (QOV), although elsewhere, in financial economics, it has been called option value or real options [see, for example, Kolstad (143), Dixit & Pindyck (144)].”
- Uncertain Outcomes and Climate Change Policy (2012, background): “For a discussion of these and other studies of the interaction of uncertainty and irreversibility, see Pindyck (2007).”