http://ner.sagepub.comNational Institute Economic Review DOI: 10.1177/002795010719900102 2007; 199; 4 National Institute Economic ReviewPartha Dasgupta Commentary: The Stern Review's Economics of Climate Changehttp://ner.sagepub.com The online version of this article can be found at: Published by:http://www.sagepublications.com On behalf of: National Institute of Economic and Social Research can be found at:National Institute Economic Review Additional services and information for http://ner.sagepub.com/cgi/alerts Email Alerts: http://ner.sagepub.com/subscriptions Subscriptions: http://www.sagepub.com/journalsReprints.navReprints: http://www.sagepub.com/journalsPermissions.navPermissions: © 2007 National Institute of Economic and Social Research. All rights reserved. Not for commercial use or unauthorized distribution. at UNIV CALIFORNIA BERKELEY LIB on February 20, 2008 http://ner.sagepub.comDownloaded from4NATIONALINSTITUTEECONomicREVIEWNo.199JANUARY2007COMMENTARY:THESTERNREVIEW'SECONOMICSOFCLIMATECHANGEParthaDasgupta*Wheneconomistsanalvsepublicpolicy,they taketwosetsofconsiderationsintoaccout.ritFirst,theyidentifythewaysinwhichtheworldmightwork(thewaysinwhichpeoplewouldchooseundervariouscircumstances,thepathwaysNaturechooses,andsoon).Orncethattaskisdone,theyareabletocharttheconsequences(perhapslong-termconsequences)ofalternativepolicies.Secondly,theyvaluethoseconsequencessoastobeabletojudgetherelativedesirabilitiesofthealternativepolicies.Theformersetofexercisesinvolvesdescription,whilethelatterinvolvesevaluation.Disagreementsoverthedesirabilityofalternativepublicpoliciesarisewhenipeopledon'tagreeonfacts(e.g.,theeconomiceffectsofadoublingofcarbonconcentrationintheatmosphere)orwheintheydon'tagreeonvalues(e.g.,thewayourwell-beiigoughttobebalancedagainsttheVellhbejigof,IIthosefuturethems).Usually,ofcourse,bothfactsandvaluesaresutbjecttodispute.Readingthemanyreportson)theSterniReview(heinceforlththeReview)thathavebeenipublishedinnewspapersanldmagaziiessinceitslaunich-interestingly,readingtheReviewitself-wotildgiveonletheinipressoioithatthecasethathasbeenibtilltbytheauthorsforstronIg,imimiediateaictioninthefornofanianiniiuaIexpeniditureofaabout1percenitofglobalGDPinordertothwartthepossibilityofcllagesamnolunitingtoasmnuchas"O20perceiltofGDP"(ttheReviewswordirng)tunderbusiriessasusual,restsexclusivelvoninrsightsdrawnrfromthenewandmorerefinedglobalcirculationmodelsofclimatescientists.TheReviewwillhopefullybescrutinisedbypeersinduecourse.Mycommentswillbeparticularlyinexpert,becauseIhavehadonlyafewdaystostudyit.ButtheconclusionIhavereachedisthatthestrong,immediateactiononclimatechangeadvocatedbytheauthorsisanimplicationoftheirviewsonintergenerationalequity;itisn'tdrivensomuchbythenewclimaticfactstheauthorshavestressed.InwhatfollowsIexplainwhatImeanbythat.Itneedssayingatoncethattheethicalframeworkwithinwhichtheauthorshave chosentoworkisstandardinmoderneconomics.TheauthorsconductaCook'stourofcontemporaryethicaltheories,butprettysoongetdowntotheframeworkmoderneconomistshaveadoptedfortheirethicalreasoning.Aparticularversionofthatframework,amountingtoClassicalUtilitarianism,wasproposedbyFrankRamseyinhisgreat1928paperintheEconomicJournal('AMathematicalTheoryofSaving').TheauthorsoftheReviewfollowRamseyclosely.However,thenumeericalfiguresfortheethicalparameterstheReviewproposesareinotgiveinbytheframework.WenieedtodeliberatefurtherifwZearetoarriveatthem.EventhemTeGnin1111goftheethicalparametersisIn>tself-evidenit,becausethereareseveralalternitivephilosophicalunderpinnlinigsofRamsev'sformulaL.itionIOfintergenerationiljiustfice.Moreove;eac-hiniterpretstheparametersinitsownway(seeDisgupti,2005).TheReviewiscuriouslysilentonthedifferencesintheviews`SirParthaDasgupta,FRAFRS,FrankRamseyProfessorofEconomics,UniversityofCambridge.ThesecommentswerepreparedforaseminarontheSternReview'sEconomicsofClimateChange,organisedbytheFoundationforScienceandTechnologyattheRoyalSociety,London,onNovember8,2006.TheReviewisalongandimrpressivedocument.Theauthorshaveputtogethermuchthatisnowknownabouttheeffectsofcarbonemissionsonhumanwell-beingandtheyrermindreadersofthosemattersthatareveryunknown.ItispossiblethoughthatreaderswillnotnoticethattheauthorshavetreatedoneimportantaspectoftheReview'seconomicanalysiscavalierly.Thecommentsthatfollowaredirectedatthataspect. © 2007 National Institute of Economic and Social Research. 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Not for commercial use or unauthorized distribution. at UNIV CALIFORNIA BERKELEY LIB on February 20, 2008 http://ner.sagepub.comDownloaded fromCOMMENTARY:THESTERNREVIEWSECONOMICSOFCLIMATECHANGEDASGUPTA5expertsholdaboutwhattheparametervaluesoughttobeeIt issilentalsoontheseveralphilosophicaluinderpinlilnigsofRamsey'smathematicalformulation,,mullchexploredbvmodernwelfareeconomists.AssuIme,astheReviewdoes,thatagenieratioio'swell-beiingisthesumofthewell-beinigsofthemembersofthatgeierationi.Assumetoo,astheReviewdoes,thateachpersonI'swell-beingdepenidsonihisorherlevelofconstumption.Bytheethicalvati-esthatreflecttheideaofintergernerattionaleqluityImTeiaritwothirngs:(1)thetrade-offsthatoutghtttobemadebetveenrthewell-beinrgsoffuturegenerationsarndouIrowrnwell-beirig,givernthatfuturegenerationswillbehereorlyvinrthefuture;and(2)thetrade-offsthatoughttobemiiadebetweenrthewell-beingsofpeopleregardlessofthedateatwhichtheyappearonthescene.Technically,(1)isreflectedinthetime/risk-of-extinctiondiscountrate,which,followingtheReview,Ishallcalldelta;and(2)isreflectedintheelasticityofthesocialweightthatoughttobeawardedtoasmallincreaseinanindividualsconsumptionlevel,which,followingtheReviewIshallcalleta.BothtermsaredefinedintheReview(Chapters2and2A).Ifdeltareflectsthewaythefutureisseenthroughtoday'stelescope,etaisameasureoftheaversiontointerpersonalinequalitvandriskinconsumption.TheReview,rightlyinmyview,takesitthatthetrade-offamongthewell-beingbetweenthe