Decision Criteria, Scientific Uncertainty, and the Globalwarming Controversy

Froyn, Camilla Bretteville

doi:10.1007/s11027-005-3782-9

Cited by 15 publications

(7 citation statements)

References 44 publications

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“…While most such analyses employ an expected utility or cost effectiveness criterion [America's Climate Choices (Liverman and Raven 2010)], the debate regarding the most appropriate criteria for comparing alternative policies is not settled in the literature (Hof et al 2010;Kunreuther et al 2013). Some studies have investigated the benefits of the minimax regret decision criteria for abatement decisions because it only requires estimates of worst case outcomes (Froyn 2005;Hof et al 2010;Loulou and Kanudia 1999;Van den Bergh, 2004). Other studies examine various robustness criteria (Dessai and Hulme 2007;Wilby and Dessai 2010;Brown 2011;Reeder and Ranger 2011;Hall et al 2012), some of which balance between mini-max regret and expected utility (Lempert and Collins 2007).…”

Section: Some Implications Of the Resultsmentioning

confidence: 99%

Aided and unaided decisions with imprecise probabilities in the domain of losses

Budescu

Broomell

Lempert

et al. 2014

EURO Journal on Decision Processes

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We report results of a series of experiments on decision-making in the presence of irreducibly imprecise probabilities of negative and undesirable outcomes. Subjects faced decisions among actions where the payoffs depend on the probability of drawing balls from an urn whose composition was not fully known. Consistent with the vagueness avoidance hypothesis, Decision Makers (DMs) displayed systematic preferences for safe actions even at a high premium. This tendency grew with increased vagueness, characterized by the width of the interval of plausible probabilities. We compared two decision aids that portray these imprecise probabilities in different ways: one aid calculates the expected value of alternative actions contingent on probability distributions provided by the DMs, and the other displays graphically the distribution of the conditional expected value of the actions over the entire range of plausible probabilities. Access to either decision aid reduced vagueness avoidance and the type of aid used systematically influenced the way DMs approached the problem. We compared the DMs' choices with predictions of decision models for decision under ignorance and under risk. We found support for Electronic supplementary material The online version of this article (doi:10.1007/s40070-013-0023-4) contains supplementary material, which is available to authorized users. the conservative maxi-min criterion, but a subjective expected value model with probabilities inferred from the partial information available also performed well, especially for low levels of vagueness and in the presence of decision aids. These findings suggest some initial implications for the debate over how to best characterize imprecise probabilistic information for policy-makers when decisions involve irreducible uncertainties, such as climate change.

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Section: Some Implications Of the Resultsmentioning

confidence: 99%

Aided and unaided decisions with imprecise probabilities in the domain of losses

Budescu

Broomell

Lempert

et al. 2014

EURO Journal on Decision Processes

View full text Add to dashboard Cite

show abstract

“…Other scholars have argued in favor of the non-probabilistic "maxmin" decision rule for maximizing the economic welfare for a worst case climate scenario (see e.g., Froyn 2005;Funke and Paetz 2011). Climate change is due to the cumulative nature of carbon concentration (Ulph and Ulph 1997;Weitzman 2012).…”

Section: Introductionmentioning

confidence: 99%

Uncertainty and International Climate Change Negotiations

Cai

McKibbin

2015

Ital Econ J

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Because issues associated with climate change are historically unprecedented and thus policymakers do not have a prior distribution over possible outcomes, the usual theoretical approach based on governments maximizing expected utility may not be suitable for analysing climate policy choice. Under an alternative plausible assumption that policymakers act strategically but choose the policy that incurs the highest possible gain in the worst-case scenario, this paper shows how collectivism can be inferior to unilateralism in both carbon mitigation and economic loss minimization. Our proposed approach provides a possible explanation for several paradoxes in the existing literature in relation to uncertainty and climate policy negotiation. It also provides an analytical framework that can be applied to numerical simulations of international climate policy games.

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“…Integrated Assessment Models of climate change (IAMs) often adopt the classic decision-making framework of expected utility maximization (Ackerman et al 2009;Bretteville Froyn 2005) that identifies an optimum strategy contingent on a single best estimate joint probability distribution over the uncertain input parameters of the model. EUM has at least two important advantages.…”

Section: Introductionmentioning

confidence: 99%

“…These two alternative decision criteria, Safety First (SF) and Limited Degree of Confidence (LDC), both balance the goal of maximizing the expected utility with minimizing the worst-case performance (Aaheim and Bretteville 2001;Bretteville and Froyn 2005). The LDC criterion maximizes a weighted average of the expected utility and the utility in the worst-case futures.…”

Section: Introductionmentioning

confidence: 99%

What are robust strategies in the face of uncertain climate threshold responses?

2012

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We use an integrated assessment model of climate change to analyze how alternative decision-making criteria affect preferred investments into greenhouse gas mitigation, the distribution of outcomes, the robustness of the strategies, and the economic value of information. We define robustness as trading a small decrease in a strategy's expected performance for a significant increase in a strategy's performance in the worst cases. Specifically, we modify the Dynamic Integrated model of Climate and the Economy (DICE-07) to include a simple representation of a climate threshold response, parametric uncertainty, structural uncertainty, learning, and different decision-making criteria. Economic analyses of climate change strategies typically adopt the expected utility maximization (EUM) framework. We compare EUM with two decision criteria adopted from the finance literature, namely Limited Degree of Confidence (LDC) and Safety First (SF). Both criteria increase the relative weight of the performance under the worst-case scenarios compared to EUM. We show that the LDC and SF criteria provide a computationally feasible foundation for identifying greenhouse gas mitigation strategies that may prove more robust than Electronic supplementary material The online version of this article (548 Climatic Change (2012) 112:547-568those identified by the EUM criterion. More robust strategies show higher near-term investments in emissions abatement. Reducing uncertainty has a higher economic value of information for the LDC and SF decision criteria than for EUM.

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Decision Criteria, Scientific Uncertainty, and the Globalwarming Controversy

Abstract: climate policy, decision criteria, global warming, greenhouse gas abatement, irreversibility, scientific uncertainty, uncertain choice,

Cited by 15 publications

References 44 publications

Aided and unaided decisions with imprecise probabilities in the domain of losses

Aided and unaided decisions with imprecise probabilities in the domain of losses

Uncertainty and International Climate Change Negotiations

What are robust strategies in the face of uncertain climate threshold responses?

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