Consumption tradeoff vs. catastrophes avoidance: implications of some recent results in happiness studies on the economics of climate change

Ng, Yew‐Kwang

doi:10.1007/s10584-010-9880-z

Cited by 10 publications

(3 citation statements)

References 31 publications

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“…For ease of comparison, suppose the population size of the whole world will not change throughout the future and that the total utility per year of each person also will not change (except that the realization of future utilities is subject to the extinction uncertainty of δ per year). This assumption is biased against our case as economic and technological advance will likely increase the total utilities of future generations (Ng, ).…”

Section: The Importance Of Reducing Extinction Probabilitiesmentioning

confidence: 99%

The Importance of Global Extinction in Climate Change Policy

2016

Global Policy

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For problems like global climate change that may involve global extinction, we must not just focus, as most economic analysts do, on the trading-off of current consumption (current mitigation investment reduces consumption) against future consumption (less need for future investment), but also consider the effects of mitigation investment in reducing the extinction probabilities. Future utility/welfare values should only be discounted at the uncertainty of their realization, making these values even in the far future important as this discount rate should be very low (0.01 per cent per annum or less). Immediate and strong actions of environmental protection including greenhouse gas reduction may thus be justified despite high consumption discount rates (about 5 per cent). Unexpectedly, an increase in the extinction probabilities may increase or decrease our willingness to reduce them; precise conditions are given. The related intuition that, the higher the probability of destruction of your house by fire, the less willing you will be in investing on things like interior decoration that does not change the probability of destruction, but the higher your willingness to pave a fire clearance that does reduce the probability of destruction, is examined. Policy Implications• For problems like global climate change that may involve global extinction, we must not just focus, as most economic analysts do, on the trading-off of current consumption (current mitigation investment reduces consumption) against future consumption (less need for future investment), but also consider the effects of mitigation investment in reducing the extinction probabilities.

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Section: The Importance Of Reducing Extinction Probabilitiesmentioning

confidence: 99%

The Importance of Global Extinction in Climate Change Policy

2016

Global Policy

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“…Thus, in this sense, cardinal utility can be assumed away on the ground of Occam's razor for such problems. However, to insist on ordinal utility only (denying the use or cardinal utility) even for other problems (such as happiness studies, social choice, optimal population, choices affecting the probabilities of survival; see (Ng, 2011) on the latter issue) where cardinal utilities are needed, is to commit the fallacy of misplaced abstraction.…”

Section: Happiness Is Cardinally Measurable and Interpersonally Compamentioning

confidence: 99%

Some Conceptual and Methodological Issues on Happiness: Lessons From Evolutionary Biology

2015

Singapore Econ. Rev.

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Despite recent intense interest, happiness studies have been impeded by some conceptual and methodological problems, including viewing happiness (well-being/welfare) as different over different persons, as relative, multi-dimensional, non-cardinally measurable, interpersonally non-comparable and using non-cardinal and interpersonally non-comparable methods of happiness measurement. Using the evolutionary biology of happiness, this paper argues that happiness is absolute, universal, and unidimensional and is also cardinally measurable and interpersonally comparable. This is needed to make choices motivated by reward (pleasure) and punishment (pain) consistent with fitness maximization. However, happiness indices obtained by virtually all existing methods of happiness measurement are largely non-cardinal and non-comparable, making the use of averaging in group happiness indices of dubious philosophical validity. A method of measuring happiness to give cardinal and interpersonally comparable indices is discussed. These may contribute towards the more scientific study of happiness that is based on sounder methodological grounds as well as yielding more useful results.

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“…Ng (2011) explains this importance using a simple example: the NPV (Net Present Value) of a Million US dollars 200 years from now discounted at 1.4% (used by Stern) has a PV (Present Value) of US$59,618, but has a PV of only US$35 if discounted at 5% (market rate) i.e. a difference of a factor of 1,700 between the two calculations.…”

Section: Considering Long Time Horizons -Discounting and The Impact Omentioning

confidence: 99%

Quantifying Catastrophic and Climate Impacted Hazards Based on Local Expert Opinions

et al. 2014

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The analysis of catastrophic and climate impacted hazards is a challenging but important exercise, as the occurrence of such events is usually associated with high damage and uncertainty. Often, at the local level, there is a lack of information on rare extreme events, such that available data is not sufficient to fit a distribution and derive parameter values for the frequency and severity distributions. This paper discusses local assessments of extreme events and examines the potential of using expert opinions in order to obtain values for the distribution parameters. In particular, we illustrate a simple approach, where a local expert is required to only specify two percentiles of the loss distribution in order to provide an estimate for the severity distribution of climate impacted hazards. In our approach, we focus on so-called heavy-tailed distributions for the severity, such as the Lognormal, Weibull and Burr XII distribution. These distributions are widely used to fit data from catastrophic events and can also represent extreme losses or the so-called tail of the distribution. An illustration of the method is provided utilising an example that quantifies the risk of bushfires in a local area in Northern Sydney.

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Consumption tradeoff vs. catastrophes avoidance: implications of some recent results in happiness studies on the economics of climate change

Cited by 10 publications

References 31 publications

The Importance of Global Extinction in Climate Change Policy

The Importance of Global Extinction in Climate Change Policy

Some Conceptual and Methodological Issues on Happiness: Lessons From Evolutionary Biology

Quantifying Catastrophic and Climate Impacted Hazards Based on Local Expert Opinions

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