This is a reminder for:
Title: Fabien Medvecky
Discounting for Opportunity Cost: The case of climate change economics.
One of the leading debates in environmental economics and especially
climate change economics is over discounting. Discounting is an economic
tool that decreases future costs and benefits by a yearly rate, the
discount rate. While most economists agree that there should be some
discounting, what they disagree about is how much we should discount by,
and why we should discount. One of the most commonly found reasons for
discounting is opportunity costs which is defined as "the value of the best
alternative use of a resource". In this paper I will consider the extent to
which opportunity cost can be used to justify discounting in social
environmental decisions with long time horizons such as climate change
mitigation policies. I will argue that the standard use of interest rates
as a measure of opportunity costs is unhelpful on two counts: 1) it just
moves the need for justification along rather than resolving it- rather
than having to justify using the discount rate we use, we now need to
justify using the interest rate we use- and 2) it attempts to derive an
'normative claim from a descriptive claim. Furthermore, I will argue that
when we try to offer a more substantial measure of opportunity costs (one
that offers a justification rather than simply shifts the need for
justification) we run into complications because the definition of
opportunity costs- "the value of the best possible alternative use of a
resource"- is ambiguous. I will dispel that ambiguity by cashing out the
difference between the value of the best possible alternative use of a
resource and the expected value of the best alternative use of a resource.
I will finish by arguing that once the correct definition of opportunity
costs is endorsed then opportunity cost can only justify discounting by an
amount equivalent to the expected growth rate in the economy.
When: Mon Mar 14 1pm - 2:30pm Eastern Time - Melbourne, Sydney
Where: University of Sydney philosophy common room
Calendar: Current Projects
Who:
* [email protected] - creator
Event details:
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