using genuine savings for climate policy evaluation with an integrated assessment model there has been a recent increase in efforts to develop broader models to assess the impact of climate change and climate change policies both in terms of impact measures beyond gdp and in terms of modelling complexity beyond dice rice models climate policies aimed at reducing co2 emissions can have impacts in multiple sectors of the economy and can change consumption levels over time we show how the sustainability indicator genuine savings can be endogenised within a general equilibrium model and used as a criterion for judging the impacts of such policies in terms of future well being differences in genuine savings rates between co2 emission reduction scenarios are discussed we show how a broader genuine savings based assessment of climate change can result in a re evaluation of the consequences and costs of inaction in terms of various climate change related policies and how multiple environmental and well being outcomes can be analysed within a unified modelling framework

testing genuine savings as a forward looking indicator of future well being over the very long run genuine savings gs have been much used in recent years as an indicator of a country s sustainability according to some theorists e g arrow et al 2012 under certain conditions a country with a positive level of gs should experience non declining future utility given the assumption of unlimited substitutability among all forms of capital sometimes called weak sustainability this paper reports the first very long run tests of gs also called comprehensive investment or adjusted net savings as a forward looking indicator of future well being we assemble data for british capital back to 1765 and construct several net investment measures which are used as indicators of two alternative measures of future well being consumption per capita and real wages an allowance for a value of time due to exogenous technological progress is included in some gs measures and we demonstrate the importance of this measure and the choice of discount rate over the very long run on the whole our results do not reject the postulated relationship between gs and future well being and show gs can be a forward looking indicator of future well being for periods of up to 100 years

climate change policy what do the models tell us very little a plethora of integrated assessment models iams have been constructed and used to estimate the social cost of carbon scc and evaluate alternative abatement policies these models have crucial flaws that make them close to useless as tools for policy analysis certain inputs e g the discount rate are arbitrary but have huge effects on the scc estimates the models produce the models descriptions of the impact of climate change are completely ad hoc with no theoretical or empirical foundation and the models can tell us nothing about the most important driver of the scc the possibility of a catastrophic climate outcome iam based analyses of climate policy create a perception of knowledge and precision but that perception is illusory and misleading jel c51 q54 q58

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

sustainability and technical progress a rigorous model connects together the following three basic concepts 1 sustainability meaning the generalized future power of an economy to consume over time 2 green nnp meaning a current measure of national income that subtracts off from gnp not just depreciation of capital but also more generally depletion of environmental assets evaluated at current efficiency prices 3 technological progress meaning a projection onto the future of the so called solow residual a simple general formula is derived some crude calculations suggest a possibly strong effect of the residual which hints that our best present estimates of long term sustainability may be largely driven by predictions of future technological progress

rents and the cost and optimal design of commodity taxes this paper numerically investigates the significance of rents for both the welfare costs and the optimal design of commodity taxes using a general equilibrium model calibrated to 1986 canadian data in the data we use ricardian rents are concentrated in agriculture and utilities with market structure rents concentrated in manufacturing different types of rents have different implications for the welfare cost of taxes and hence also for appropriate tax design ricardian rents lower the cost of taxes rents supported by imperfect competition with no free entry raise the cost of taxes rents supported by regulation generate rent seeking costs and if taxed improve resource allocation model results show a markedly nonuniform optimal tax structure and a substantial influence of the treatment of rents on the pattern of optimal tax rates by commodity

how substitutable is natural capital one of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital this issue was raised early on in the debate on sustainability by pearce and has never really been resolved this paper is an empirical attempt to measure the degree of substitutability between different forms of capital a nested ces production function is used to allow flexibility in the estimated elasticities of substitution also within this specification natural resources and other inputs are combined in different levels of the function thus allowing for different levels of substitutability institutional and economic indicators are also incorporated in the production function estimated results show that the elasticities derived from functions involving land resources were generally around one or greater implying a fairly high degree of substitutability furthermore changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation no statistically significant relationship between income and any of the institutional indicators was found

one sided sustainability tests with amenities and changes in technology trade and population abstract if an economy with multiple consumption goods including environmental amenities uniquely maximises present value with constant discounting it is unsustainable at some time if either of two measures augmented net investment or the change in augmented green net national product are zero or negative then augmented denotes that time is treated as a productive stock which includes in each measure the value of future exogenous changes in technology or terms of trade adjustments are found to make each measure a test for individual sustainability when population grows exogenously the practical and philosophical rationale for testing sustainability in a present value maximising and therefore fully prescribed development path is discussed

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

lobbying and the measurement of conventional welfare cost it is widely accepted that the welfare cost of distortionary policy has two components the first component is the conventional welfare cost of lost economic surplus due to an inefficient allocation of resources the second component is the rent seeking cost associated with efforts to influence policy if the policy in question is an excise tax the partial equilibrium measure of conventional welfare cost is the harberger triangle of lost consumer and producer surpluses partial equilibrium rent seeking costs are measured by the amount spent to influence policy total welfare cost is the sum of the two measurements while how one determines and thus measures the equilibrium amount of rent seeking is the subject of much debate and modelling the measurement of conventional welfare cost is not controversial 1 furthermore conventional welfare costs are treated as independent of the manner in which rent seeking occurs for example consider the welfare cost of monopoly see tullock 1967 or posner 1975 the portion o f the total welfare cost due to underproduction is measured by the harberger triangle of lost surplus whatever the method by which monopoly rights are obtained the benefits of rent seeking accrue entirely to the holder of the monopoly right any rent seeking expenses are treated as fixed costs with no effect on the monopolist s output decision the form that rent seeking takes is irrelevant to the measurement of conventional welfare cost in other cases the form rent seeking takes is relevant consider a multi firm industry subjected to an excise tax if effective lobbying requires a collective lobbying effort and if a firm s share of the industry s rent seeking expenses vary with a firm s output rent seeking will affect the firm s and industry s marginal cost functions the impact of rent seeking on marginal cost if overlooked leads to mismeasurement of conventional welfare cost and thus the total welfare cost of the policy moreover the direction of measurement error

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

monetary valuation in life cycle assessment a review abstract monetary valuation is the practice of converting measures of social and biophysical impacts into monetary units and is used to determine the economic value of non market goods i e goods for which no market exists it is applied in cost benefit analysis to enable the cross comparison between different impacts and or with other economic costs and benefits for this reason monetary valuation has a great potential to be applied also in life cycle assessment lca especially in the weighting phase however several challenges limit its diffusion in the field which resulted in only a few applications so far the authors have performed a review of different monetary valuation methods for use in lca firstly monetary valuation approaches methods and lca applications were identified secondly key features and the strengths and weaknesses of each monetary valuation method were determined finally monetary valuation methods and lca applications were evaluated according to a comprehensive set of criteria ranging from scientific foundation to uncertainty and complexity it was found that observed and revealed preference methods and the abatement cost method have limited applicability in lca whereas the choice experiment method and the budget constraint method are the best options for monetary valuation in lca

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

comprehensive wealth and future consumption accounting for population growth economic theory predicts that the current change in national wealth broadly defined to include natural and human capital as well as produced capital genuine savings determines whether the present value of future changes in consumption is positive or negative theoretical research has focused on the effects of population growth on this relation but no rigorous empirical investigation has been conducted panel data for 64 developing countries during 1970 82 are used to test the effects of three adjustments for population growth including one that controls for omitted wealth although the adjustments have substantial impacts on estimates of genuine savings they lead to only limited improvements in the relation between those estimates and subsequent consumption changes even without adjustments for population growth adjustments for natural resource depletion improve the relation significantly policymakers and economists can interpret published estimates of genuine savings as signals of future consumption paths if and only if the estimates include adjustments for natural resource depletion but better estimates of capital stocks are needed before it can be confidently said that adjustments for population growth significantly improve the accuracy of those signals

towards a more inclusive and precautionary indicator of global sustainability abstract we construct a hybrid economic indicator of the sustainability of global well being which is more inclusive than existing indicators and incorporates an environmentally pessimistic physical constraint on global warming our methodology extends the world bank s adjusted net saving ans indicator to include the cost of population growth the benefit of technical progress and a much higher precautionary cost of current co 2 emissions future warming damage is so highly unknowable that valuing emissions directly is rather arbitrary so we use a novel inductive approach we modify damage and climate parameters in the deterministic dice climate economy model so it becomes economically optimal to control emissions in a way likely to limit warming to an agreed target here 2 c if future emissions are optimally controlled our ans then suggests that current global well being is sustainable but if emissions remain uncontrolled our base case ans is negative now and our corresponding modified dice model has an unsustained development path with well being peaking in 2065 current ans on an uncontrolled path may thus be a useful heuristic indicator of future unsustainability our inductive method might allow ans to include other very hard to value environmental threats to global sustainability like biodiversity loss and nitrogen pollution

dicer a tool for analyzing climate policies abstract modeling the economy and the planet s climate involves a great number of variables and parameters some of them very uncertain given the current stage of knowledge regarding technology and the science of climate the dicer model or dice regional is a recently constructed integrated assessment model iam based on the structure of the dice family of models which was developed as an instrument for the analysis of uncertainties in climate policy this paper aims to describe the basic version of dicer on which future developments addressing uncertainty in climate policy analysis will be based our results suggest a few interesting conclusions when compared to other iams i under a plausible set of assumptions and parameters dicer indicates that an optimal global climate policy would imply higher costs of climate change in the short run but a faster and more expensive decarbonization process in all regions resulting in a faster stabilization of the climate ii lower peak temperatures that occur earlier in time iii considerable sensitivity of results to key parameters such as climate sensitivity but lower than expected sensitivity to the social discount rate

the importance of manufacturing in economic development has this changed summary manufacturing has traditionally played a key role in the economic development of developing countries in recent years it has been argued that the importance of manufacturing has diminished over the last 20 25 years resulting in premature deindustrialization or non industrialization in developing countries this study explores whether the low levels of industrialization in developing countries are attributable to long term changes in opportunities available to the sector around the globe the study s findings show that the manufacturing sector s value added and employment contribution to world gdp and employment respectively have not changed significantly since 1970 the declining manufacturing value added and manufacturing employment share in many developing countries has not been caused by changes in the sector s development potential but has instead resulted from a shift of manufacturing activities to a relatively small number of populous countries thus resulting in a concentration of manufacturing activities in specific developing countries as was the case in the last millennium industrialization has continued to play a key role in the growth of developing countries which have sustained rapid and long term growth for the last 25 years achieving economic development by following the path of industrialization will likely remain important for low income countries because they are able to take advantage of their backwardness relative to those countries which have already experienced rapid industrialization with a disproportionately large share of manufacturing activities and could soon enter a mature stage of industrialization

buying greenhouse insurance the economic costs of carbon dioxide emission limits in recent years a growing concern that the increasing accumulation of greenhouse gases will lead to undesirable changes in global climate has resulted in a number of proposals both in the united states and internationally to set physical targets for reducing greenhouse gas emissions but what will these proposals cost based on the authors earlier ground breaking work buying greenhouse insurance outlines a way to think about greenhouse effect decisions under uncertainty it describes an insightful model for determining the economic costs of limiting carbon dioxide emissions produced by burning fossil fuels and provides a solid analytical base for rethinking public policy on the farreaching issue of global warming manne and richels present region by region estimates of the costs that would underlie an international agreement using a computer model known as global 2100 they analyze the economic impacts of limiting c02 emissions under alternative supply and conservation scenarios the results clearly indicate that a reduction in emissions is not the sole policy response to potential climate change following a summary of the greenhouse effect its likely causes and possible consequences manne and richels take up issues that concern the public at large they provide an overview of global 2100 look at how the u s energy sector is likely to evolve under businessas usual conditions and under carbon constraints and describe the concept of greenhouse insurance they consider possible global agreements including an estimate of benefits that might result from trading in an international market in emission rights they conclude with a technical description directed toward modeling specialists alan manne is professor of operations research at stanford university richard richels is director of the energy analysis and planning department at the electric power research institute

efficient rents 1 rent seeking behavior in the long run we have analyzed long run behavior in rent seeking under several conditions and behavioral hypotheses the question of interest is whether or not the long run expenditures will exactly equal the value of the rents our results depend on the type of competitive response which is assumed to exist in the long run and on the r value governing the probability of winning

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

the social cost of rent seeking first estimates omists have been unanimous in their verdict that rent seeking is socially wasteful if rational from the practitioner s perspective 1 the entire literature on rent seeking that has developed over the past twenty years has focused on a describing the process of rent seeking b describing the theoretical consequences of rent seeking and c applying the theory to examination of political behavior and political outcomes to our knowledge there have been no attempts to empirically verify quantify the alleged social waste due to rentseeking the purpose of this paper is to report our first stab efforts in this regard we make no pretense of advancing the theory of rent seeking the investigation is an empirical search for a phillips curve type of relationship between incidence of rent seeking in the u s economy and the size growth of that economy our findings based on both time series and cross sectional analysis of the u s economy verify the existence of a social cost to rentseeking our crude estimate of the impact of rent seeking suggests that rentseeking as we measure it cost the economy an additional 22 6 percent of measured gnp in 1985

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

on sustainability and social welfare abstract this paper proposes to define sustainability in terms of leaving it possible for future generations to sustain certain defined targets it is shown that variants of genuine savings and the ecological footprint can then serve as indicators of sustainability the link between sustainability and intergenerational welfare is examined and it is shown how to incorporate indicators of sustainability into a social welfare measure including risk in the analysis

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded