Discussion Paper

No. 2009-4 | January 06, 2009
Now or Never: Environmental Protection under Hyperbolic Discounting

Abstract

The author analyzes the optimal investment in environmental protection in a model of an infinite series of non-overlapping hyperbolically discounting agents. He shows that without a commitment mechanism society is eventually stuck in a situation where all agents prefer further investment in the long run, yet neither present nor future agents will actually ever invest. Such an outcome is not only unsatisfactory for each generation but may also be inefficient in a Pareto sense. The author’s results are consistent with real world observations, and thus provide a new explanation for weak environmental policy performance.

Paper submitted to the special issue “Discounting the Long-Run Future and Sustainable Development

JEL Classification

D90 Q50 Q58

Cite As

Ralph Winkler (2009). Now or Never: Environmental Protection under Hyperbolic Discounting. Economics Discussion Papers, No 2009-4, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2009-4

Assessment



Comments and Questions


Fabio Antoniou and Dr. Vangelis Dyikitopoulos - Referee Report
February 16, 2009 - 11:17

see attached file


Ralph Winkler - Revision Report
April 06, 2009 - 09:00

see attached file


Ralph Winkler - Revised Manuscript
April 06, 2009 - 09:01

see attached file