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Irreversibility, ignorance, and the intergenerational equity-efficiency trade-off

Author

Listed:
  • Nikolai Hoberg

    (Sustainability Economics Group, Leuphana University of Lüneburg, Germany)

  • Stefan Baumgärtner

    (Sustainability Economics Group, Leuphana University of Lüneburg, Germany)

Abstract

Two important policy goals in intergenerational problems are Pareto-efficiency and sustainability, i.e. intergenerational equity. We demonstrate that the pursuit of these goals is subject to an intergenerational equity-efficiency trade-off. Our analysis highlights two salient characteristics of sustainability problems and policy: (i) temporal irreversibility, i.e. the inability to revise one’s past actions; and (ii) unawareness of future consequences of present actions in human-environment systems (“unknown unknowns”). If initially unknown sustainability problems become apparent and policy is enacted after irreversible actions were taken, policy-making faces a fundamental trade-off between Pareto-efficiency and sustainability.

Suggested Citation

  • Nikolai Hoberg & Stefan Baumgärtner, 2011. "Irreversibility, ignorance, and the intergenerational equity-efficiency trade-off," Working Paper Series in Economics 198, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:198
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    climate change; closed ignorance; intergenerational equity-efficiency tradeoff; irreversibility; Pareto-efficiency; sustainability; unawareness;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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