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Journal Article

No. 2009-12 | April 09, 2009
Now or Never: Environmental Protection under Hyperbolic Discounting PDF Icon

Abstract

The author analyzes the optimal investment in environmental protection in a model of non-overlapping hyperbolically discounting agents. He shows that, in the long run and in the absence of a commitment device, society is stuck in a situation where all agents prefer further investments, yet no agent invests. This holds no matter whether agents are aware of the time inconsistency of their preferences. As a consequence, awareness of the time-inconsistency problem poses at best a short run remedy. Moreover, such an outcome may be Pareto inefficient and may explain the weak performance of long-run environmental policies.

JEL Classification

D90 Q50 Q58

Citation

Ralph Winkler (2009). Now or Never: Environmental Protection under Hyperbolic Discounting. Economics: The Open-Access, Open-Assessment E-Journal, 3 (2009-12): 1—22. http://dx.doi.org/10.5018/economics-ejournal.ja.2009-12

Assessment

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