Journal Article
No. 2009-12 | 2009.04.09
Ralph Winkler
Now or Never: Environmental Protection under Hyperbolic Discounting
(Published in Discounting the Long-Run Future and Sustainable Development)

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

Cite As

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