how much damage will climate change do recent estimates two reasons to be concerned about climate change are its unjust distributional impact and its negative aggregate effect on economic growth and welfare although our knowledge of the impact of climate change is incomplete and uncertain economic valuation is difficult and controversial and the effect of other developments on the impacts of climate change is largely speculative the authors find that poorer countries and people are more vulnerable than are richer countries and people a modest global warming is likely to have a net negative effect on poor countries in hot climates but may have a net positive effect on rich countries in temperate climates if one counts dollars the world aggregate may be positive if one counts people the world aggregate is probably negative negative impacts would become more negative and positive impacts would turn negative for more substantial warming the marginal costs of carbon dioxide emissions are uncertain and sensitive to assumptions that partially reflect ethical positions but are unlikely to be larger than 50 per tonne carbon

the equivalency principle for discounting the value of natural assets an application to an investment project in the basque coast making decisions about optimal investments in green infrastructure necessitates setting social discount rates this paper suggests a practical way for determining the discount rate for projects or programmes in which one of the options is to maintain or improve land in its natural state we propose an a equivalency principlea to derive a simple rule that sets the discount rate the rule is based on the premise that the long term value of a naturally preserved land track ought to be at least the same as the value of an identical land track in the vicinity to which permission has been granted for development we illustrate this principle with various case studies and we apply it to a contentious investment project in the basque country associated with the regeneration of a large scale harbour in the province of gipuzkoa north of spain that involves reclaiming natural land that has important ecological value including for the conservation of a marine ecosystem

a new method of estimating risk aversion i show existing evidence on labor supply behavior places an upper bound on risk aversion in the expected utility model i derive a formula for the coefficient of relative risk aversion in terms of the ratio of the income elasticity of labor supply to wage elasticity and degree of complementarity between consumption and labor i bound the degree of complementarity using data on consumption choices when labor supply varies across states using labor supply elasticity estimates i find a mean estimate of 1 then show generating 2 requires that wage increases cause sharper labor supply reductions jel d81 j22

honesty in tournaments we apply the die rolling experiment of fischbacher and follmi heusi 2013 to a two player tournament incentive scheme our treatments vary the prize spread the data highlights that honesty is more pronounced when the prize spread is small

probabilistic time scheduling model for an exponentially decaying inventory when delays in payments are permissible abstract a probabilistic time scheduling model is developed for an exponentially decaying inventory when the supplier offers some credit period t for settling the accounts for the purchase quantity the credit period t is known constant mathematical models are derived for both the cases i t t and ii t t expressions are derived for the total average expected cost of the system the optimum cycle time and the time for obtaining optimum order levels s s0 under each case the model is illustrated in two particular forms

measuring attitudes towards inequality individuals attitudes to inequality aversion are measured using survey data based on the leaky bucket experiment for several groups of students in australia and israel three forms of social welfare function are estimated it is found that measures of inequality aversion can be obtained with some precision and that these estimates are substantially lower than the values typically used by those measuring inequality and examining optimal tax structures furthermore a welfare function based on the gini inequality measure is generally found to give a better fit than forms based on constant relative or constant absolute inequality aversion jel classification c91 d63

economic purchasing strategies for temporary price discounts abstract the familiar model for determining the optimal stock replenishment strategy for a temporary price reduction is based on the simple eoq this paper extends the logic to a composite eoq model which can be decomposed into a family of hybrid models with broader operational flexibility the composite eoq provides malleability and flexibility to changing operational requirements by disaggregating complexity it approaches the resourcefulness of an expert system with its attendant economies

the economics of climate change impacts a la stern novel and nuanced or rhetorically restricted abstract the stern report conducts an estimation of greenhouse gas control costs weighed against the benefits of avoiding damages at the global scale as i show stern and colleagues are aware of the limits to cba although they chose to ignore the considerable literature on the subject the many contributions by ecological economists and especially work specific to the enhanced greenhouse effect various problems are raised or mentioned in the report including strong uncertainty incommensurability plural values non utilitarian ethics rights distributional inequity poverty and treatment of future generations how then can this report acknowledging so many of those aspects of climate change that render cba an unsuitable tool for generating policy recommendations go ahead to conduct a global cba and make policy recommendations i explain how issues are suppressed and sidelined in a careful and methodical manner with the pretence they have been addressed by state of the art solutions meanwhile the authors maintain allegiance to an economic orthodoxy which perpetuates the dominant political myth that traditional economic growth can be both sustained and answer all our problems besides perpetuating myths this diverts attention away from alternative approaches away from ethical debates over harming the innocent the poor and future generations and away from the fundamental changes needed to tackle the very real and serious problems current economic systems pose for environmental systems

reflections on the stern review 2 a growing international opportunity to move strongly on climate change this paper highlights the basic economic principles behind the policy recommendations in the stern review and takes forward the analysis and proposals of the review it is written in the light of developments since the review was published reflecting on interaction with policy makers and analysts around the world and other commentators on the review its authors argue that across the world progress of understanding and developing the necessary policy response to climate change has been especially rapid in the last few months building on these developments and the review team s initial analysis they outline a policy programme going forward for international collective action to tackle climate change

the social cost of carbon and its policy implications the shadow price or social cost of carbon is an important indicator of the global incremental damage done by emitting greenhouse gases today cost benefit analysis would set the optimal amount of greenhouse gas emission reduction at the point where this social cost just equals the incremental cost of controlling emissions the higher the value for the social cost of carbon the more control is warranted this comparison assumes that cost benefit analysis is the correct way of determining climate change policy and many believe this is not the case because of the very long term irreversible and potentially catastrophic nature of global warming but in the short run at least a comparison of cost and benefits is required and in any event all decisions imply costs and benefits but what is the right figure for the social cost of carbon this paper reviews the uk government s assessment of the cost and concludes that it has been set far too high because of a misreading of the integrated assessment models used to balance costs and benefits moreover adoption of the uk government s shadow price would have formidable implications for energy policy in the uk and for policies on afforestation copyright 2003 oxford university press

economy wide estimates of the implications of climate change human health we study the economic impacts of climate change induced change in human health viz cardiovascular and respiratory disorders diarrhoea malaria dengue fever and schistosomiasis changes in morbidity and mortality are interpreted as changes in labour productivity and demand for health care and used to shock the gtap e computable general equilibrium model calibrated for the year 2050 gdp welfare and investment fall rise in regions with net negative positive health impacts prices production and terms of trade show a mixed pattern direct cost estimates common in climate change impact studies underestimate the true welfare losses

the stern review a deconstruction using a simple model designed for transparency but nonetheless calibrated to support the much quoted damage estimates of the stern review of the economics of climate change we demonstrate significant sensitivity of those results to assumptions about the pure rate of time preference the time horizon and the rates of risk and equity aversion used to compute certainty and equity equivalent annuities most importantly we demonstrate enormous sensitivity to presumed constant regional vulnerability and underlying assumptions about adaptive capacity manipulation of any of these parameters one at a time across reasonable ranges can diminish damage estimates by as much as 84 or in the case of extending the time horizon with the review s low discount rate increase damage estimates by 900 we also confirm the usual result that limiting atmospheric concentrations to specific benchmarks above 400 ppm cannot eliminate all damages nonetheless we applaud the stern review author team for reconfirming that the climate problem can be approached productively as an economic problem whose solutions can be explored with the tools of decision analysis 2008 elsevier ltd all rights reserved

an inventory model with deteriorating items under inflation when a delay in payment is permissible abstract this study develops an inventory model for initial stock dependent consumption rate when a delay in payment is permissible in the inventory model shortages are not allowed the effect of the inflation rate deterioration rate initial stock dependent consumption rate and delay in payment are discussed in the study mathematical models are also derived under two different circumstances i e case i the credit period is less than or equal to the cycle time for settling the account and case ii the credit period is greater than the cycle time for settling the account besides expressions for an inventory system s total cost are derived for these two cases moreover a computational procedure and gino lasdon et al acm transactions mathematical software 4 1978 34 50 are proposed to obtain the optimal order size and cycle time the results can help managers determine the optimal total cost finally a numerical example demonstrates the applicability of the proposed model

right for the right reasons four authors of the stern review on the economics of climate change and dennis anderson who provided advice and background papers for the review make a final rejoinder on the debate about the review that has occupied recent issues of this journal they respond to comments in the present issue by carter et al by henderson and by tol and yohe carter et al continue to argue against a growing body of scientific evidence and a growing consensus on that same evidence the source of their critique is first a distinctly partisan and increasingly untenable position on the broad range of available scientific evidence and second a mistrust of the international consensus building exercise centred on the intergovernmental panel on climate change henderson is also largely preoccupied with the latter procedural issues tol and yohe focus on economic arguments their critique is rather narrower in focus and concerns the way in which abatement costs were calculated in the supporting work carried out by dennis anderson it rests on basic confusions and misconceptions many of which were explained in previous contributions however readers of world economics might be more interested in a broader reflection how would the stern team following the debate of the last eight months assess the approach policies and arguments set out in the review their view is that their analyses and policy proposals and the arguments in support are sound and have stood up well to scrutiny in other words they were right and for the right reasons central to many critiques of the review is a fundamental misunderstanding of the role of formal highly aggregated economic modelling nevertheless the stern team have argued strongly and in their view convincingly that even within the confines of formal economic modelling the concerns raised by a small group of commentators do not overturn their basic conclusion that the cost of action is much less than the cost of inaction the critics here fall short by failing to simultaneously afford the necessary importance to issues of risk and ethics

the stern review and the costs of climate change mitigation responding to the dual critique and the tol and yohe paper in the previous issue of world economics professor anderson counters a number of assertions made in those papers including the claims that the stern review is alarmist or scaremongering biased in its estimates and was not reviewed by peers he points to a number of areas where the authors either got it wrong or seriously misrepresented the review

a review of the stern review on the economics of climate change the stern review calls for immediate decisive action to stabilize greenhouse gases because the benefits of strong early action on climate change outweighs the costs the economic analysis supporting this conclusion consists mostly of two basic strands the first strand is a formal aggregative model that relies for its conclusions primari ly upon imposing a very low discount rate concerning this discount rate aspect i am skeptical of the review s formal analysis but this essay points out that we are actual ly a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged the review s second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertain ties that are difficult to quantify concerning this uncertainty aspect i argue that it might be recast into sound analytical reasoning that might justify some of the review s conclusions the basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consump tion smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings

what is wrong with the west european economies tol and yohe point out that in their reply vol 8 no 1 to tol and yohe s review vol 7 no 4 the stern team demonstrates the fragility of the numerical findings of the cost benefit analysis in the stern review at the same time the stern team puts less weight on cost benefit analysis as a guide to policy making on climate change tol and yohe show that the stern review allows several mutually contradictory interpretations of the model that underlies the cost estimates and argue that each interpretation implies that stern s cost estimates have a severe downward bias

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

optimal ordering policies under conditions of extended payment privileges this paper develops optimal order quantities for firms that are offered a one time opportunity to delay payment for an order of a commodity such delayed payments result in a reduction of the effective purchase cost which is a function of the return available on alternative investments the number of units of the commodity ordered and the length of the extended period optimal order quantities are developed for extended payment privileges that occur at a reorder point of between reorder points six suppliers extended payment scenarios are evaluated a simulation analysis is conducted to determine the sensitivity of derived models to changes in the various input parameters the simulation with realistic parameter values reveals that the additional discounted order quantity is insensitive to large changes in the ordering cost and unit price sensitive to changes in the carrying cost and return rate of funds but without significantly affecting the total cost and extremely sensitive to the annual demand

the emergence of a regional financial architecture in asia this paper provides an assessment of monetary and financial cooperation in asia since the regional financial crisis of 1997 98 with a view to determining whether the emerging regional financial architecture in asia is compatible with the global financial architecture and what are the prospects for possible economic and monetary union monetary and financial cooperation has focused on four architectural pillars economic policy surveillance crisis prevention liquidity support and bond market development which can be consistent with the global architecture however progress toward full integration is likely to be gradual and experimental given the lack of strong regional institutions regional economic disparities and the need to build political commitment to such a goal

one time only incentives and inventory policies abstract this paper presents a review of the literature available on inventory policies under incentives on a one time only basis it is quite a common industrial practice to offer special incentives to motivate the buyer to order in larger than regular order quantities such special deals are available for a limited time only the literature on inventory policies under conditions of incentives has been classified by the nature of incentives such as price discount and credit period a situation of announced price increase which is very similar to price discount is also reviewed the policy implications of various scenarios are highlighted and areas of future research are identified

the assessment emu four years on this paper reviews the functioning of the economic and monetary union over the first 4 years of its existence monetary policy is viewed as having been of the inflation targeting type but with a tendency towards delay and conservatism in adjustment which may also reflect over optimistic output growth forecasts the resulting pressure on the stability and growth pact sgp illustrates the weakness in the consensus view of the harmonious interaction of monetary fiscal and supply side policies which requires policy in all three areas to be correct in discussing reform of the sgp a looser but still constraining form of fiscal agreement is advocated the supply side and balance of payments issues involved in inter country adjustment also interact importantly with the sgp and are identified as key areas of difficulty in a still immature monetary union with separate labour market structures here the mechanisms for coordination are more or less absent copyright 2003 oxford university press

optimal ordering policies in response to a discount offer corrections abstract recently sarker and kindi 2006a optimal ordering policies in response to a discount offer international journal of production economics 100 2 195 211 presented an inventory model from the purchaser s perspective to determine the optimal ordering policies in response to a discount offer established by the supplier for five possible cases this study presents some practical extensions to the optimal ordering policies developed by sarker and kindi 2006a optimal ordering policies in response to a discount offer international journal of production economics 100 2 195 211

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

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