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Climate change uncertainty, irreversibility and the precautionary principle

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  • Jonathan Aldred

Abstract

This paper begins with a critique of the option value argument used by economists to explain and justify the precautionary principle. The argument is shown to misrepresent both uncertainty and irreversibility. An alternative justification of the precautionary principle is discussed, under conditions of Keynesian uncertainty, and irreversibility interpreted in terms of incommensurability. Recent formal decision theories under Keynesian uncertainty are reviewed and their limitations explored, with particular reference to the insights that decision theory can bring to understanding the precautionary principle. Throughout, the decision problems under consideration are those faced by climate change policy makers. Copyright , Oxford University Press.

Suggested Citation

  • Jonathan Aldred, 2012. "Climate change uncertainty, irreversibility and the precautionary principle," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 36(5), pages 1051-1072.
    • Handle: RePEc:oup:cambje:v:36:y:2012:i:5:p:1051-1072
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    File URL: http://hdl.handle.net/10.1093/cje/bes029
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    Cited by:

    1. Roos, Michael W. M., 2015. "The macroeconomics of radical uncertainty," Ruhr Economic Papers 592, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. Dafermos, Yannis & Nikolaidi, Maria, 2019. "Fiscal policy and ecological sustainability: a post-Keynesian perspective," Greenwich Papers in Political Economy 37777, University of Greenwich, Greenwich Political Economy Research Centre.
    3. Robert J. R. Elliott & Ingmar Schumacher & Cees Withagen, 2020. "Suggestions for a Covid-19 Post-Pandemic Research Agenda in Environmental Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 1187-1213, August.
    4. Aldred, Jonathan, 2013. "Justifying precautionary policies: Incommensurability and uncertainty," Ecological Economics, Elsevier, vol. 96(C), pages 132-140.
    5. Yannis Dafermos & Maria Nikolaidi, 2019. "Fiscal policy and ecological sustainability," FMM Working Paper 52-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Kjell Hausken, 2018. "Formalizing the Precautionary Principle Accounting for Strategic Interaction, Natural Factors, and Technological Factors," Risk Analysis, John Wiley & Sons, vol. 38(10), pages 2055-2072, October.
    7. Kjell Hausken, 2019. "Principal–Agent Theory, Game Theory, and the Precautionary Principle," Decision Analysis, INFORMS, vol. 16(2), pages 105-127, June.
    8. Hausken, Kjell, 2021. "The precautionary principle as multi-period games where players have different thresholds for acceptable uncertainty," Reliability Engineering and System Safety, Elsevier, vol. 206(C).
    9. Michel, Stephan & Romano, Alessandro & Zannini, Ugo, 2017. "Joint Use of Liability and Regulation in Environmental Law," ILE Working Paper Series 5, University of Hamburg, Institute of Law and Economics.
    10. Bachner, G. & Mayer, J. & Steininger, K.W. & Anger-Kraavi, A. & Smith, A. & Barker, T.S., 2020. "Uncertainties in macroeconomic assessments of low-carbon transition pathways - The case of the European iron and steel industry," Ecological Economics, Elsevier, vol. 172(C).

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