intergenerational equity and sustainability abstract this paper explores the limitations of conventional economic analysis of intergenerational problems and examines some of the alternatives suggested in the literature it is argued that proper consideration of future generations has at least three requirements first when future costs and benefits are considered it should be taken into account that they are to be enjoyed by different generations second the sustainability requirement should be adopted this represents an equity commitment to the future and implies the recognition that future generations have the right to nondeteriorated ecological and economic capacity the paper studies the ways in which the recognition of these rights might be incorporated into economic evaluation and management third an appropriate institutional network to enforce the recognition of these rights in decision making processes should be constituted its design and necessary functions are also analyzed

cost benefit assessment of energy efficiency investments accounting for future resources savings and risks in the australian residential sector this article focuses on the impact of the discount rate on cost benefit assessment of investment options for residential building efficiency an integrated thermal modeling life cycle costing approach is applied to an extensive sample of dominant house designs for australian conditions the relative significance of predicted thermal performance and the applied discount rate on the present value of energy savings from alternative investment scenarios is investigated costs and benefits are also evaluated at the economy wide scale including carbon pricing considerations and for a test case household faced with alternative investment options at the point of construction the influence of the applied discount rate on produced cost benefit calculations is investigated as is the interaction between critical cost benefit input parameters findings support that the discounting framework is the primary driver of difference in estimates about costs and benefits of higher standards of efficiency in the residential sector results demonstrate that agreement on a low discount rate based on sustainability principals would prioritise those projects with significant environmental benefits

are judges leading economic theory sunk costs the threat of entry and the competitive process in this paper we attempt to bring theoretical form to a particular entry argument that has found favor in the courts we suggest that sunk costs may not be a major impediment to entry when a group of customers can commit to an entry enhancing strategy buyers have strong incentives to adopt such strategies because they benefit directly from the resulting lower prices the simplest example involves a large buyer that is able to guarantee an entrant a market for its product long term contracts or even informal purchase commitments backed by customer reputation may also allow the entrant to obtain a guarantee of sufficient business to make the entry profitable once entry is thought likely to occur the existing competitors may be unwilling to attempt a price increase of any magnitude thus the threat of entry can maintain competitive prices even in the presence of sunk costs in section ii we motivate the analysis by discussing the current controversy over the role entry conditions play in an antitrust merger review then we discuss the necessary assumptions for a model of how the threat of entry can deter any price increase in the presence of sunk costs we note that these conditions are different from those commonly used in the economic literature

the effects of stock market growth and renewable energy use on co2 emissions evidence from g20 countries the primary objective of this study is to empirically examine the effect of stock market growth and foreign direct investment fdi inflows on co2 emissions further this study investigates the impact of renewable energy consumption on co2 emissions and economic output in a panel of the g20 countries the empirical analysis was carried out on the full sample as well as on sub samples of developed and developing economies of the g20 member countries the results confirm a significant long run equilibrium relationship among the variables across the panels further the long run elasticities suggest that fdi significantly reduces co2 emissions in the full sample and developing economies while stock market growth reduces in developed economies similarly the renewable energy consumption substantially reduces co2 emissions and increases economic output across the panels our findings have important policy implications for instance the policy makers have to initiate effective policies to promote the renewable energy sources to meet the increasing demand for energy by replacing the use of conventional energy such as coal gas and oil this will therefore help to reduce the co2 emissions and also ensure sustainable economic development in the g20 nations

rationalizing hyperbolic discounting abstract we show that if agents are uncertain about their discount rates it may be rational for them to discount the distant future hyperbolically rather than exponentially our findings thus may rationalize a common observation in experimental work which indicates that people discount the future at hyperbolic rates we show that under some assumptions uncertainty over hazard rates may lead to non constant discounting but not imply dynamically inconsistent behavior under other assumptions uncertainty over discount rates can lead to dynamically inconsistent behavior like violating planned consumption profiles by bringing consumption forward

accounting technologies and sustainability assessment models abstract within ecological economics there is recognition of the need for new approaches to decision making to support sustainable development initiatives there is an increasing acknowledgement of the limitations of cost benefit analysis approaches as a measure of the un sustainability of organizational activities these are viewed as particularly inappropriate within the participatory settings that sustainable development proponents seek to foster they also fail to deal with the highly contested nature of sustainable development discourse in contemporary pluralist democracies while advances have been made in the field of multi criteria decision making there is still a relative dearth of versatile models that accommodate monetization in a way that recognizes the limits of calculative technologies this article introduces readers to developments within the accounting discipline designed to support sustainable development decision making and evaluation in particular it proposes sustainability assessment models as a viable alternative to cost benefit analysis sustainability assessment models are based on an inter disciplinary approach that recognizes the need for accountings that facilitate more participatory forms of decision making and accountability as such they address many of the weaknesses in current approaches to cost benefit analysis the authors first experiences with sustainability assessment models were with bp and the united kingdom oil and gas sector where models were developed as a means of making previously external costs more central to organizational decision making later work has included exploration of a range of decision making situations in private and public sector organizations in both the united kingdom and new zealand this has involved more explicit attention to plural values and issues of participation dialogue and democracy

valuing the future recent advances in social discounting the perplexing issue of discounting prescriptive economics requires that unless there are very good reasons to the contrary economic policy should be based on the principle that individuals preferences should count indeed the entire body of welfare economics centres round the formal identity of the statement x prefers a to b and the statement x has higher welfare in a rather than b this combination of a seemingly innocuous and democratic value judgement preferences should count and a formal definition about the meaning of welfare improvement involves many complications the entire history of policy analysis focuses on those complications whose preferences should count over what time period what constitutes a legitimate attenuation of the basic value judgement one of the problem areas concerns timediscounting the process whereby society places a lower value on a future gain or loss than on the same gain or loss occurring now the rationale for time discounting follows logically from the basic value judgement of welfare economics if people s preferences count and if people prefer now to the future those preferences must be integrated into social policy formulation time discounting is thus universal in economic analysis but it remains as it always has controversial the controversy has a parallel in another form of discounting spatial discounting when translated into economic terms the ethical principle

market structure and import share a regional market analysis in this paper we analyze the relationship between domestic market structure and cement importation into the united states we do this by examining the impact of concentration technology scale costs and demand on imports into twenty independent united states regional cement markets for a number of years by looking at only one industry as opposed to importation across several diverse industries we hope to remove inter industry effects that may mask the relationship between import share and selected structural characteristics the use of time series data allows us to examine import response to variations in demand over the business cycle this paper is divided into six sections the next describes the united states portland cement industry including its geographically segmented nature production methods demand conditions and incentives for importation section iii contains a model that relates import shares to market structure the data to estimate this model are discussed in section iv section v contains

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

discounting and distributional considerations in the context of global warming the economics of global warming is reviewed with special emphasis on how the cost depends on the discount rate and on how costs in poor and rich regions are aggregated into a global cost estimate both of these factors depend on the assumptions made concerning the underlying utility and welfare functions it is common to aggregate welfare gains and losses across generations and countries as if the utility of money were constant but it is not if we assume that a e co2 equivalent dlubling implies costs equal to 1 5 of the income in both high and low income countries a pure rate of time preference equal to zero and a utility function which is logarithmic in income then the marginal cost of co2 emissions is estimated at 260 590 usd ton c for a time horizon in the range 300 1000 years an estimate which is large enough to justify significant reductions of co2 emissions on purely economic grounds the estimate is approximately 50 100 times larger than the estimate made by nordhaus in his dice model and the difference is almost completely due to the choice of discount rate and the weight given to the costs in the developing world as well as a more accurate model of the carbon cycle finally the sensitivity of the marginal cost estimate with respect to several parameters is analyzed

discounting of long term costs what would future generations prefer us to do decisions with intergenerational consequences may leave future generations worse off i e not be pareto optimal if costs and benefits are not discounted correctly we point out that this happens if the conventional social discount rate is applied to intergenerational costs with that rate the justification of intergenerational costs benefits of a project are invested and the proceeds can cover future costs leads to an inconsistency over the long term eventually the supposed benefits of any project become larger than the entire gnp the conventional approach commits an error by treating the time preference component of the discount rate as if it represented creation of wealth while it really involves only redistribution the time horizon of the redistribution is limited by the duration of market transactions especially loans thus we recommend a two step discounting procedure with the conventional social discount rate for the short term about 30 years and the growth rate of the economy for the long term data for gnp per capita growth in the us the uk france germany japan and the soviet union since the industrial revolution combined with data for net economic welfare per capita suggest an intergenerational discount rate in the range of 1 to 2 for practical application the rate at which costs and benefits will grow over time is just as important as the discount rate only the difference between these two rates matters for many environmental costs these rates may be close to each other during the next few generations this implies that some of the uncertainty in the prediction of rates cancels and one can treat the problem as if the effective rate were close to zero the consequence for costs such as global warming or nuclear power can be very significant the valuation can increase by more than an order of magnitude compared to values based on conventional discounting

empirical and public choice evidence for hyperbolic social discount rates and the implications for intergenerational discounting the derivation of the correct discount rate for intergenerational projects in cost benefit analysis is particularly contentious public choice has resulted in lower discretionary exponential discount rates for many intergenerational projects in britain and the usa this is shown to be strong indirect evidence that the true social discount rate may be a hyperbolic rather than an exponential function there is also empirical evidence for this hypothesis the hyperbolic nature of discounting is also a standard finding in the behavioural sciences for intergenerational time frames hyperbolic discount rates should be employed together with exponential discount rates in cost benefit sensitivity analyses

why the far distant future should be discounted at its lowest possible rate abstract a critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting this paper shows that there is a well defined sense in which the lowest possible interest rate should be used for discounting the far distant future part of any investment project some implications are discussed for evaluating long term environmental projects or activities like measures to mitigate the possible effects of global climate change

the non economics of the nuclear fuel cycle an historical and discourse analysis abstract the development of commercial nuclear power seems irrational while the nature of the nuclear fuel cycle has been well known since the early days of nuclear power the problem of disposing of nuclear waste has only recently become a central area of concern and research also commercial nuclear power has probably never been truly economically competitive as it has received large subsidies it is argued that the rise of nuclear power can be understood through the use of discourse analysis where the discourse of the modernising and interventionist state is well matched to the discourse of nuclear power as offering control and modernity

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

between ostrom and nordhaus the research landscape of sustainability economics abstract we survey the emerging research area of sustainability economics through a quantitative full text analysis of peer reviewed journal publications from 1987 to 2013 to identify relevant contributions we draw on existing definitions of sustainability economics for a keyword based identification strategy a combined focus on a the human nature relationship b the long term uncertain future c normative orientation towards sustainability and d economic analysis our analysis of a random subsample of 343 relevant papers reveals that i sustainability economics is a rapidly developing research area ii while theoretical contributions shaped the area in earlier years applied work now constitutes the largest share of contributions iii the research landscape can be clustered into eleven research clusters these range from participatory governance of social ecological systems associated with the work of elinor ostrom to questions of intertemporal allocation and distribution applied to climate economics associated with the work of william nordhaus iv the research area is broad in scope and heterogeneous and there is relatively little interaction between important clusters v relevant contributions are published in more than 100 journals ten journals publish half of all contributions led by ecological economics and 40 appear in non economics journals underscoring the importance of interdisciplinary dialogue

renewable resources and economic sustainability a dynamic analysis with heterogeneous time preferences abstract in recent years there has been increasing interest in the study of economic sustainability and its relationship with natural resources this paper attempts to shed some light on the issue by taking into account the individual variations in time preferences for consumption and resource amenity we characterize the long run steady state analyze its asymptotic stability and explore the transational dynamics from any initial state the welfare implications of the optimal path are also discussed

on the extent of the market wholesale gasoline in the northeastern united states this paper develops the classical view of the extent of markets by introducing explicitly in the analysis the concept of arbitrage costs arbitrage or transaction costs imply that market boundaries are essentially stochastic while a set of products or regions may have binding arbitrage conditions i e may be in the same market at a given point in time they may not at another thus in defining a market the probability that a set of agents or regions would h3ve binding arbitrage conditions has to be assessed this paper develops an econometric methodology to estimate the transaction costs required to arbitrage among a given set of products as well as the probability that that set of products would be bound by binding arbitrage condi tions finally the methodology is applied to wholesale gasoline in the northeastern part of the united states address for communications pablo t spiller herbert hoover memorl l bldg 9348 stanford ca 94305

equilibrium vertical foreclosure the authors formulate a complete but analytically simple equilibrium model of vertical mergers to evaluate the logic of standard vertical foreclosure claims and the criticisms made of those claims the model includes incentives of the integrated firm and unintegrated input suppliers to exclude rivals and the potential holdout problem in this fully specified model vertical foreclosure can emerge in equilibrium copyright 1990 by american economic association

terminal railroad revisited foreclosure of an essential facility or simple horizontal monopoly rollowing the supreme court s 1986 decision in aspen ski there has been a renewed interest in the essential facilities doctrine the doctrine as we understand it is inconsistent with economic theory broadly stated the doctrine says that if assets cannot be economically reproduced by another firm but are economically essential to all producers of some good then all producers of that good should have equal access to the assets the doctrine presumes that the firm controlling such assets will not provide access equally to all firms this problem is thought to be particularly acute in cases where the firm owning the asset is one among a group of competitors needing that asset to produce some other good the case that has been cited as establishing the doctrine and the classic essential facilities case 2 is united states v terminal railroad association of st louis 3 several recent articles4 on this case detail three important propositions

horizontal concentration and anticompetitive behavior in the central canadian cement industry testing arbitrage cost hypotheses abstract consider a market with a small number of firms attempting to collude if they successfully act as a dominant firm they will raise price this in turn will expand output by any fringe firms and thus reduce the market share of the colluding group thus higher prices will decrease concentration over time here we test this hypothesis using a modification of spiller and huang 1986 and data from the post 1974 toronto cement market the weight of the evidence indicates that market price has a negative effect on concentration implying that the firms in this market act with significant though limited success as a cartel

beyond homo economicus evidence from experimental economics environmental policies are generally based on a model of the human actor taken from neoclassical economic theory this paper reports on laboratory experiments suggesting weaknesses in this model and describes alternative models correcting these weaknesses one finding is that economic actors tend to be hyperbolic as opposed to exponential discounters who discount the immediate future at a higher rate than the more distant future another finding is that economic actors are not self regarding but rather in many circumstances are strong reciprocators who come to strategic interactions with a propensity to cooperate respond to cooperative behavior by maintaining or increasing cooperation and respond to free riders by retaliating against the offenders even at a personal cost and even when there is no reasonable expectation that future personal gains will flow from such retaliation we discuss some implications for policy analysis 2000 elsevier science b v all rights reserved

is there anti competitive behaviour in the central canadian cement industry testing arbitrage cost hypotheses allegations of anticompetitive behavior in the central canadian cement industry have focused around the effects of cement producers buying their downstream distributors if indeed vertical integration is causing cement prices to rise the relevant economic theories imply that the arbitrage cost of shipping cement to central canada is greater than the cost of shipping cement from this region the authors investigate this theory by econometrically estimating the relevant arbitrage costs their analysis supports the hypothesis that vertical integration has increased barriers to entry for cement in toronto but it fails to support a similar hypothesis for montreal

does better discounting lead to worse outcomes in long run decisions the dilemma of hyperbolic discounting the shortcomings of conventional discounting especially in the context of long run environmental problems have been extensively discussed in the literature recently hyperbolic discounting i e discounting at declining instead of constant discount rates has attracted a lot of interest among both scientists and politicians although there are compelling arguments for employing hyperbolic discounting there are also pitfalls which have to be pointed out in this paper i show that the problem of time inconsistency an inherent characteristics of hyperbolic discounting leads to a potential clash between economic efficiency and intergenerational equity as an example i refer to the weak progress in the controlling of greenhouse gas emissions under the kyoto protocol as the problem of time inconsistency cannot be solved on economic grounds alone there is a need for an intergenerational moral commitment

valuing the future one of the most controversial areas of economics is the practice of discounting attaching a lower weight to future costs and benefits than present costs and benefits discounting appears to offend notions of sustainable development and the interests of future generations recent advances in the theory of discounting hold out strong hope that the tyranny of discounting can be avoided through the use of time varying discount rates tvdrs this paper reviews the recent rationales for tvdrs and applies the results to issues such as nuclear power and global warming control