The Stern review, and the social discount rate objection
I don't know nearly enough economics to understand this topic. Yet. Anyone want to explain it?
In this morning's Australian the fair-way-to-the-right Alan Wood questions the assumptions underpinning the economic model used in the Stern review on climate change. The article, not that lucid or explanatory, is here.
The somewhat-to-the-left economist John Quiggin is already responding to this criticism (although not as made by Alan Wood specifically). His paper on the subject, pitched to an audience of economists, can be found here (PDF).
The political bigot in me wants to assume that the Stern review is correct, but it'd be nice if someone who understands what the "social discount rate" actually is could get me to that position by reason as well!
EDIT: discussion of the social discount rate on Wikipedia.
EDIT: further links - Quiggin's blog post introducing his article, and a New York Times article that he links to discussing some of the opposing views.
Also, a particularly punchy quote from Quiggin's take that hammers home flyingblogspot's point about the choice of parameters being driven by ideology:"John Quiggin: At the margin, it's the same question. If you oppose paying $70 now to transfer $940 to wealthy people in the future, you should support taxing wealthy people $940 now to pay $70 to poor people, unless you specifically discount the utility of future generations simply because they are in the future. I'm not saying that this is an implausible preference, just that it indicates the kinds of trade-offs that are involved."
In this morning's Australian the fair-way-to-the-right Alan Wood questions the assumptions underpinning the economic model used in the Stern review on climate change. The article, not that lucid or explanatory, is here.
The somewhat-to-the-left economist John Quiggin is already responding to this criticism (although not as made by Alan Wood specifically). His paper on the subject, pitched to an audience of economists, can be found here (PDF).
The political bigot in me wants to assume that the Stern review is correct, but it'd be nice if someone who understands what the "social discount rate" actually is could get me to that position by reason as well!
EDIT: discussion of the social discount rate on Wikipedia.
EDIT: further links - Quiggin's blog post introducing his article, and a New York Times article that he links to discussing some of the opposing views.
Also, a particularly punchy quote from Quiggin's take that hammers home flyingblogspot's point about the choice of parameters being driven by ideology:"John Quiggin: At the margin, it's the same question. If you oppose paying $70 now to transfer $940 to wealthy people in the future, you should support taxing wealthy people $940 now to pay $70 to poor people, unless you specifically discount the utility of future generations simply because they are in the future. I'm not saying that this is an implausible preference, just that it indicates the kinds of trade-offs that are involved."