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Ecological intuition versus economic "reason"

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  • Roger Guesnerie

    (Collège de France - Chaire Théorie économique et organisation sociale - CdF (institution) - Collège de France, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Jean-Michel Lasry

    (Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Olivier Guéant

    (Chaire Finance et Développement Durable, approches quantitatives - Institut Europlace de Finance - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - EDF - EDF - CALYON)

Abstract

This article discusses the discount rate to be used in projects that aimed at improving the environment. The model has two different goods, one is the usual consumption good whose production may increase exponentially, the other is an environmental good whose quality remains limited. The stylized world we describe is fully determined by four parameters, reflecting basic preferences "ecological" and intergenerational concerns and feasibility constraints. We define an ecological discount rate and examine its connections with the usual interest rate and the optimized growth rate. We discuss, in this simple world, a variety of forms of the precautionary principle.

Suggested Citation

  • Roger Guesnerie & Jean-Michel Lasry & Olivier Guéant, 2009. "Ecological intuition versus economic "reason"," PSE Working Papers halshs-00575067, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00575067
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00575067
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    Cited by:

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    2. Xing, Shiqi & Batabyal, Amitrajeet, 2019. "A Safe Minimum Standard, an Elasticity of Substitution, and the Cleanup of the Ganges in Varanasi," MPRA Paper 93846, University Library of Munich, Germany, revised 15 Mar 2019.
    3. Newbery, David, 2018. "Policies for decarbonizing a liberalized power sector," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-24.
    4. Stefan Baumgärtner & Alexandra Klein & Denise Thiel & Klara Winkler, 2015. "Ramsey Discounting of Ecosystem Services," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 273-296, June.
    5. Katsuyuki Shibayama & Iain Fraser, 2014. "Nonhomothetic Growth Models For The Environmental Kuznets Curve," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 919-942, August.
    6. Echazu Luciana & Nocetti Diego & Smith William T., 2012. "A New Look into the Determinants of the Ecological Discount Rate: Disentangling Social Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-44, April.
    7. Antonio Nesticò & Gabriella Maselli & Patrizia Ghisellini & Sergio Ulgiati, 2023. "A Dual Probabilistic Discounting Approach to Assess Economic and Environmental Impacts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 239-265, May.
    8. Vasquez-Lavín, Felipe & Ponce Oliva, Roberto D. & Hernández, José Ignacio & Gelcich, Stefan & Carrasco, Moisés & Quiroga, Miguel, 2019. "Exploring dual discount rates for ecosystem services: Evidence from a marine protected area network," Resource and Energy Economics, Elsevier, vol. 55(C), pages 63-80.

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