Is There Space for Agreement on Climate Change? A Non-Parametric Approach to Policy Evaluation

Dietz, Simon; Matei, Anca N.

doi:10.2139/ssrn.2343524

SSRN Journal

2013

DOI: 10.2139/ssrn.2343524

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Is There Space for Agreement on Climate Change? A Non-Parametric Approach to Policy Evaluation

Simon Dietz

Anca N. Matei

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2013

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Spaces for Agreement: A Theory of Time-Stochastic Dominance

Dietz

Matei

2013

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Many investments involve both a long time-horizon and risky returns. Making investment decisions thus requires assumptions about time and risk preferences. Such assumptions are frequently contested, particularly in the public sector, and there is no immediate prospect of universal agreement. Motivated by these observations, we develop a theory and method of finding 'spaces for agreement'. These are combinations of classes of discount and utility function, for which one investment dominates another (or 'almost' does so), so that all decision-makers whose preferences can be represented by such combinations would agree on the option to be chosen. The theory is built on combining the insights of stochastic dominance on the one hand, and time dominance on the other, thus offering a nonparametric approach to inter-temporal, risky choice. We go on to apply the theory to the controversy over climate policy evaluation and show with the help of a popular simulation model that, in fact, even tough carbon emissions targets would be chosen by almost everyone, barring those with arguably 'extreme' preferences.

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Spaces for Agreement: A Theory of Time-Stochastic Dominance

Dietz

Matei

2013

SSRN Journal

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Is There Space for Agreement on Climate Change? A Non-Parametric Approach to Policy Evaluation

Cited by 1 publication

References 35 publications

Spaces for Agreement: A Theory of Time-Stochastic Dominance

Spaces for Agreement: A Theory of Time-Stochastic Dominance

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