pension profile preferences the influence of trust and expected expenses this paper studies the influence of people s expectations about expenses during retirement and trust in pension funds on preferences for different pension arrangements although most workers prefer

sustainability policy and environmental policy a theoretical representative agent economy with a depletable resource stock polluting emissions and productive capital is used to contrast environmental policy which internalises externalised environmental values with sustainability policy which achieves some form of intergenerational equity the obvious environmental policy comprises an emissions tax and a resource stock subsidy each equal to the respective external cost or benefit sustainability policy comprises an incentive affecting the choice between consumption and investment and can be a consumption tax capital subsidy or investment subsidy or a combination thereof environmental policy can reduce the strength of the sustainability policy needed more specialised results are derived in a small open economy with no environmental effects on utility

sustainability and externalities is the internalization of externalities a sufficient condition for sustainability in an important contribution in ecological economics van de bergh 2010 correctly concludes that sustainability does not imply zero externalities however he continues with the delphic statement delphic statements were uttered by the renowned oracle of ancient greece at delphi they were phrased in such a way as to be self fulfilling because alternative interpretations covered every possibility without externalities the problem of sustainability vanishes if this statement refers to an impossible economic process that produces no externalities then he is right however it might be interpreted as stating that whenever environmental policy internalizes environmental externalities then sustainability will be ensured in this note i assert that in the real world where externalities prevail their internalization or neutralization in the traditional way cannot lead to sustainability only if internalization takes a very specific form that results in the inviolable preservation of environmental rights of future generations in pure biological terms can sustainability be ensured after revised the original commentary i resubmit it the issues raised by the editor have been carefully considered

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

an experimental test on retirement decisions i introduction the reform of social security systems is now one of the main issues on the economic policy agenda of most industrialized countries it is widely considered that unless serious changes take place the aging of the population implying a rise in the number of retirees relative to that of workers will threaten the viability of pay as you go public pension systems in the long run this threat is being reinforced by the progressive reduction in the retirement age of the working population the central reforms that are being proposed to neutralize these future financing problems are the raising of the contribution rate the decreasing of pension benefits or and the delay of the retirement age with reference to this latter reform as blondal and scarpetta 1998 state a direct way to encourage people to work longer would be to raise the pensionable age but delaying the retirement age may not be very popular according to recent surveys most workers claim that they are happy with the current retirement age see cremer and pestieau 2003 this may help to explain why reforms on the legal retirement age have currently become a very delicate matter for governments 1 on the other hand pension systems in virtually all organization for economic cooperation and development oecd countries in the mid 1990s made it financially unattractive to work after the age of 55 see gruber and wise 1997 or blondal and scarpetta 1998 indeed the general consensus in the theoretical literature related to social security and retirement decisions is that pension systems create enormous incentives to leave the labor force early 2 therefore increasing the retirement age as a tool to improve the financial problems of public pensions systems faces two sensitive problems the opposition of workers to a delay in the standard retirement age and the disincentives to continuous work being embedded in the pension system the large decline in labor force participation is attributed to the specific fact that to keep on working implies a reduction in the present value of total pension benefits the terms old age pension wealth and implicit tax on postponing retirement have been frequently used to illustrate these disincentives in the pension system the old age pension wealth is the discounted value of expected pension benefits minus the discounted cost of obtaining such benefits after the earliest age at which pensions can be accessed working for an extra year may imply changes in this pension wealth by foregoing 1 yr of pensions paying contributions for an additional year and maybe increasing the pension benefits per year therefore if the costs of postponing retirement are higher than the gains then it is considered that the pension system is implicitly taxing to prolong the working period that is the drop in pension wealth acts as an implicit tax on income from continued work and as such is a clear incentive to retire early actually reforms aiming to increase the effective retirement age to improve the financial problems of public pensions systems have mainly focused on the reduction of this implicit tax on prolonging the working period it is also considered that when the increase in pension benefits is exactly offset by the higher cost in terms of contributions and forgone pensions the pension system is not distorting the retirement decision that is the pension systems that are marginally actuarially fair will not distort individual decisions concerning retirement age and consequently they are defined as neutral systems for this reason the main economic policy measures move in the direction of strengthening the link between lifetime contributions and pension benefits 3 indeed this reform is one of the policy conclusions of maintaining prosperity in an ageing society oecd 2000 the most appropriate reform would be to allow people to retire at the age of their own choice and to adjust pension level so that the pension system is neutral on average

environmental tax policy and intergenerational distribution abstract we study the effects of environmental taxation within the context of an overlapping generations model the quality of the environment is modelled as a durable consumption good introduction of the environmental tax harms old existing generations and benefits young existing generations as well as all future generations increasing the tax in a pareto improving manner is easier the higher the pre existing tax the reverse holds if tax policy is decided by majority rule a suitably designed bond policy can be used to redistribute the efficiency gains due to the internalisation of environmental externalities across the generations

towards an operational sustainability criterion abstract this paper examines the concept of sustainability and its implications for environmental policy analysis it builds on the premise that present society holds a moral obligation to pass on a world of undiminished life opportunities to members of future generations maintaining life opportunities in turn can be achieved by maintaining or improving a diverse set of resources and capabilities that support a person s freedom to define and pursue her own conception of the good life on an operational level this framework points to the following guideline for environmental policy protecting the rights of future generations requires either the conservation of environmental resources or compensatory measures including the provision of substitute technologies that ensure the fair and proportionate sharing of net benefits over intergenerational time scales in this framework resource depletion is permissible only if with reasonable certainty it would generate a pareto improvement relative to a baseline scenario involving strict resource conservation

sustainability and the intergenerational distribution of natural resource entitlements abstract the paper describes an olg economy with a single exhaustible resource that has amenity value the steady states of this economy form a continuum implying path dependency we compare three policy scenarios first a zero extraction policy of enforced conservation that avoids environmental degradation possibly at the expense of intertemporal efficiency second a grandfathering policy that endows the present generations with all resources and that ensures efficiency but cannot prevent a persistent decline in lifetime utility from one generation to the next third a trust fund policy where future generations receive claims for the natural resource of the three only the trust fund ensures efficiency and protects welfare of all generations

optimal growth resource amenities and the preservation of natural environments this paper examines the conditions for which it is optimal to permanently preserve natural environments in which a productive natural resource is found the conditions are more restrictive than those previously indicated in the literature on the economics of natural environments increasing consumption and declining commodity prices are not sufficient to warrant permanent preservation the initial capital stock can be an important determinant of the optimal level of preservation in addition resource amenity values will increase the initial resource price and decrease the rate of growth of the resource price the natural world provides a variety of services to the human community natural resources are essential inputs in the production of goods and services in addition the natural world generates a variety of amenity services including the scientific recreational and aesthetic value of preserved natural environments krutilla 1967 krutilla and fisher 1975a this paper examines the impact of resource amenity values on the optimal growth of an economy which depends upon natural resource inputs for the production of goods and services in particular the paper examines the conditions under which it is optimal to permanently preserve some natural environments in which the productive resource is found the conditions which warrant permanent preservation are more restrictive than previously indicated by the literature on the economics of natural environments increasing consumption and declining commodity prices are not sufficient to warrant permanent preservation in addition the initial capital endowment can be an important determinant of the optimal level of preservation

social security and retirement decision a positive and normative approach social insurance for the elderly is judged responsible for the widely observed trend towards early retirement in a world of laissez faire or in a first best setting there would be no such trend however when first best instruments are not available because health and productivity are not observable the optimal social insurance policy may imply a distortion on the retirement decision the main point we make is that while there is no doubt that retirement systems induce an excessive bias towards early in many countries a complete elimination of this bias i e a switch to an actuarially fair system is not the right answer this is so and for two reasons first some distortions are secondbest optimal this is the normative argument second and on the positive side the elimination of the bias might be problematic from a political perspective depending on the political process it may either not be feasible or alternatively it may tend to undermine the political support for the pension system itself

when does it take a nixon to go to china substantial policy changes like market oriented reforms by populist parties and steps towards peace by hawks are sometimes implemented by unlikely parties to account for such episodes this paper develops a framework in which incumbent politicians have better information about the state of the world than voters the incumbent is unable to credibly transmit all this information since voters are also imperfectly informed about his ideology the paper identifies conditions under which an incumbent party s electoral prospects increase the more atypical the policy it proposes popular support for a policy or its credibility depends on the policymaker policy pair copyright 1998 by american economic association

would you like to reform the pension system the opinions of european citizens most economists would subscribe to the view that the public pay as you go payg pension systems in many european countries are unsustainable and in need of reform yet such reforms are politically very difficult a recent line of research has tried to understand the nature of these difficulties by analyzing the citizens opinions on different aspects of the welfare state and its redistributive programs here we focus specifically on the pension system reporting the results of a survey conducted in germany and italy in fall 2001 germany and italy are particularly interesting countries in this respect because their payg pension systems are very generous and provide about 85 percent of the average retiree s income germany carried out a reform in 2001 in between two waves of our survey thus we also have a natural experiment to draw upon our questionnaire was designed to shed light on the following issues are citizens aware of the unsustainability of the pension system and informed of its costs are reforms opposed by a majority or by a powerful minority which reform options seem politically more feasible and why which groups of citizens are more likely to favor reforms do citizens opinions reflect their economic self interest as presumed by the literature on political economics here is what we find citizens are aware of unsustainability but lack information about the cost of the payg system the status quo is a majoritarian outcome along many dimensions most reform proposals lack a majority and reformers rarely support more than one reform option later retirement is the easier reform in italy where effective retirement age is lower while lower pensions are more popular in germany where the effective replacement rate is higher preferences over policy options seem to reflect both economic self interest and one s normative view about the role of the state opposition to any reform is high even among those aware of unsustainability this could be procrastination or selfishness shifting the burden onto future generations some answers suggest that the latter could play an important role

strategic responses a survey experiment on opposition to pension reforms the responses given in opinion polls on future policy reforms reflect both subjective expectations and preferences we disentangle these factors using data from a controlled survey experiment conducted in germany at the time of the experiment an increased retirement age had been proposed as part of a pension reform thus the survey respondents faced an incentive to give biased responses by understating their expected work ability at the age of retirement they could make the increase of the retirement age a less attractive policy option we find evidence for such strategic response behavior and this strategic bias appears to be stronger in former communist east germany

equity effects of alternative assignments of global environmental rights abstract through a thought experiment in which members of different generations trade with each other in a virtual market we examine the effects of alternative assignments of global environmental rights on prices interest rates and the global distribution of income the model is semi calibrated to current and projected levels of the output of produced goods and to present and future quantities of global environmental goods income classes in each country are disaggregated to the quintile level multiple equilibria are possible for some rights assignments with implications for intergenerational equity the model projects bounds on the degree of future economic inequality depending on how the environmental rights are assigned a policy that assigns the environmental rights in such a way as to leave the present day distribution of income unchanged while moving in the direction of equal per capita endowments of environmental rights can result in future inequality comparable to today s average within country inequality

environmental valuation under sustainable development environmentalism has evolved since the 1960 s from a concern with the preservation of wilderness in the american experience to a concern over pollution of human habitat throughout the industrialized world northern anxiety spread to the loss of tropical rainforests and biodiversity in the south where environmentalism evolved further in an encounter with indigenous interpretations conditions and priorities by the late 1980 s climate change emerged as a central issue in a now global discourse on the relationship between environment and development the principle of sustainable development that current needs are to be met as fully as possible while ensuring that the life opportunities of future generations are undiminished relative to present is now widely accepted this paper illustrates that incorporating environmental values per se in decision making will not bring about sustainability unless each generation is committed to transferring to the next sufficient natural resources and capital assets to make development sustainable 11 refs 3 figs

the growth of social security electoral push or political pull the growth of social security electoral push or political pull i introduction during the post world war ii period the social security program was among the fastest growing programs in the federal budget surpassing defense spending as the largest category of expenditures in the mid seventies the program which disbursed only 132 million dollars in 1942 disbursed more than 156 billion dollars forty years late a thousand fold increase as a consequence of this growth and the program s recent financial problems a number of economists have turned their attention to the economics of social security recent examples include kahn 1988 boskin et al 1987 and veall 1986 yet only weaver 1982 and turner 1984 attempt to analyze the growth of the social security program weaver s legislative history of the program suggests that special interest groups had a major impact on social security programs turner argues that program benefit levels are affected by demographic changes which affect the cost of intergenerational redistribution in this paper we use the public choice approach to explain increases in benefit levels from 1946 1980 we develop and test three alternative public choice models of the politics of retirement benefit levels our analysis thus sheds light on an important question neglected by previous research have social security expenditures grown because special interest groups have effectively captured the congress or is congress simply responding to demands placed on it by the electorate the answer to this question is relevant to normative analysis of existing programs and to alternative proposals for reform in addition our study of the principal determinants of the growth of program benefit levels serves as an event study for assessing the merits of alternative theories of political decision making borcherding 1985 discusses two public choice explanations for the growth of public expenditures first public programs may expand as a result of the voting rules which underlie the political process when decisions are made by majority rule an increase in the median voter s demand for public services tends to increase public service levels because prospective candidates will revise their policy positions in order to be elected the wagner 1958 hypothesis for example maintains that increases in real income cause individuals to prefer both absolutely and relatively larger public expenditures borcherding notes that about 40 percent of the rate at which public sector spending has replaced private sector spending over the past eighty years can be explained with a median voter approach such an approach does better in what borcherding calls traditional areas of public expenditure where a median voter model can account for about 73 percent of the rate at which public expenditures excluding transfers have displaced private expenditures the median voter might favor public transfers to the elderly for two reasons first he may have an interdependent utility function in which the plight of the elderly poor arouses a charitable response while the redistribution from young to old does not simply target the old poor as a group the elderly do seem to be relatively less wealthy than the middle aged and the yound if one considers the average capitalized value of future income receipts from labor and capital second to the extent that the social security program offers a connection between reductions in current consumption and increases in future consumption it is a rather complex savings and insurance program the median voter s motivation for transferring monies to today s elderly may be a vehicle for ensuring future transfers to himself while this explanation is difficult to motivate at the individual level since a savings program for future retirement need not pay anything to today s elderly a continuing program of tax funded transfers is plausible method of establishing the moral constitution necessary to ensure that future transfers do in fact take place

would you like to shrink the welfare state a survey of european citizens welfare state reform a survey of what europeans want the fundamental problems facing european welfare states high unemployment and unsustainable public pensions plans in particular have been in the political debate for years so why have we seen so little reform to find out we surveyed the opinions of citizens in france germany italy and spain on their welfare states and on various reform options this is what we found first most workers underestimate the costs of public pensions though they are aware of their unsustainability second the status quo is a majoritarian outcome a majority of citizens opposes cuts to social security and welfare spending but also opposes further increases since population ageing without reform implies an automatic expansion our results suggest that most citizens would favour reforms that stabilize but do not shrink the current welfare states third many would welcome changes in the allocation of benefits a large number of workers in italy and germany would be willing to opt out of public pensions and replace them with private pensions though the details of how this scheme is formulated matter for its popularity and many italians and spaniards would welcome an extension of the coverage of unemployment insurance fourth conflicts over the welfare state are mainly shaped by the economic situation of the respondent while political ideology plays a limited role disagreements are found along three dimensions young versus old rich versus poor and outsider versus insider in terms of labour market status from a practical point of view this suggests that there is scope to bundle reforms strategically in order to build a large and mixed coalition of supporters tito boeri axel borsch supan and guido tabellini

on the life cycle metaphor where ecology and economics diverge abstract there is an attractive analogy between nature and industry based on the similarity of natural functions and certain industrial activities for instance animals ingest eat and digest food finally there are metabolic wastes firms are analogous to organisms in several respects insofar as they consume material resources process digest them and produce output products and excrete wastes firms like organisms also compete with each other for resources curiously enough one of the apparent differences between natural and man made systems is actually not one like the industrial system the natural system does not recycle everything however there are at least four real and important differences between the biosphere ecology and the technosphere economy first there is no primary producer in the economic system analogous to what photosynthesizers play in the biosphere inputs to the economy are mostly natural resources capital services and labor second in the economic system output is a heterogeneous mix of manufactured products and services labor in economics is an input but not an output the economic system recycles much less than the ecological system but utilizes a far greater suite of elements in the biosphere there are no products as such growth is tantamount to accumulation of embodied solar exergy in the form of cellulose sugars lipids and proteins the biosphere produces only wastes and more of itself plus dead matter third in the biosphere there are no markets there is no medium of exchange like money and there is nothing analogous to paid labor exchanges are involuntary i e by predation parasitism or theft fourth evolution in nature is driven by differentiation by random mutations of the genome and darwinian selection based on reproductive success in economics differentiation is based on discovery invention and innovation by intelligent economic agents and selection is based on competition at the individual or firm level either way the economic system is not closely analogous to an ecosystem attempts to use ecological concepts in an economic context are often misleading and unjustified the paper discusses the implications of the eco eco mismatch for resource accounting and life cycle analysis

evaluating environmental programs the perspective of modern evaluation research large scale environmental programs generally commit substantial societal resources making the evaluation of their actual effects on the relevant outcomes imperative as the example of the subsidization of energy saving appliances illustrates much of the applied environmental economics literature has yet to confront the problem of proper attribution of effects to underlying causes on a convincing methodological basis this paper argues that recent results in the econometrics and statistics literature on program evaluation could be utilized to advance considerably in this context in particular the construction of a credible counterfactual situation is at the heart of the formal statistical evaluation problem even when controlled experiments are not a viable option appropriate approaches might succeed where traditional empirical strategies fail to uncover the effects of environmental interventions

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

the dutch disease and intergenerational welfare governments in resource abundant economies face a tradeoff between transferring wealth to present generations and saving for future generations employing an overlapping generations framework with endogenous growth this article analyses the intergenerational welfare effects of 1 a wealth transfer policy where the entire wealth is transferred to the generations alive at present 2 an income transfer policy where the wealth is saved and the permanent income of the wealth is transferred to all present and future generations forever not surprisingly present generations are unambiguously better off with the wealth transfer policy less trivially however the wealth transfer policy can be associated with higher welfare also for future generations the intuition for this result is that while a wealth transfer depresses growth only in the periods subsequent to the transfer income transfers constitute a permanent drag on growth perhaps counter to the naive intuition the policy of saving the wealth and

public mosquito abatement a cluster randomized experiment mosquito abatement is a public good a simultaneous model of mosquito abundance and abatement response is developed this paper uses data from a cluster randomized controlled experiment conducted over the period 2012 2014 in urban areas of reunion in france to study the impact of who recommended mechanical elimination techniques which involve removing sources of stagnant water around the house on a number of outcomes including objective entomological indices and self declared protective behaviors empirical results document that households reduce their protective behavior in response to public control this study holds implications for arboviral disease control including zika control

the ideology of efficiency searching for a theory of policy analysis the potential pareto improvement criterion and other measures of economic efficiency do not pass the test of consistency and coherence within economic theory nor do such measures accord with what public decision makers seek in policy advice from economists such efficiency measures are nonetheless durable components of the ideology of economics in general and benefit cost analysis in particular the objectivity of the policy scientist has been confused with the objectivity of the science while economic efficiency has no claim to objectivity the policy scientist can be an objective analyst of policy choices

generational welfare under a climate change policy with induced innovation we develop a climate economy model with generational heterogeneity and the potential for climate policy induced technological change we use the model to assess the distributional implications of climate policies and of policy designs which recycle generated revenues to finance research and development r d we model only innovation in the energy generated per unit of fossil fuels so the quantitative results we derive are small our emphasis is on the distributional impacts of redistributing climate policy rents to enhance r d we show that while investments of climate policy rents to accelerate innovation are likely to be welfare improving as long as significant market failures exist they are also likely to exacerbate the distributional inequities created across generations by climate change policies the political feasibility of climate policies may be harmed by rent transfers to r d as these transfers can increase the costs borne by agents alive today while increasing benefits to generations born far into the future

policies for sustainability lessons from an overlapping generations model discounting is often considered inimical to sustainability reliance on the assumption that endowments regulate the transfer of assets to the future in standard growth models interprets the interest rate in the intergenerational context as a partial reflection of myopia a more complete market model that allows agents from different generations to engage in long term contracts with one another severs the movement of capital to the future from the endowment assumption adherence to the endowment assumption as a de facto market structure not simply a modeling convenience endorses sustainability policies that injure the future

path dependence in a ramsey model with resource amenities and limited regeneration this paper studies a ramsey optimal control economy with one consumer good extended to include several non renewable resources with amenity value the steady state equilibria of this economy are shown to form a continuum selection of the steady state to which the economy converges depends on the initial resource stocks hence unlike the usual ramsey models our model exhibits path dependency and postponement in the introduction of resource e ciency policies has long term e ects if the resource is renewable with a limited regeneration function the continuum becomes a turnpike that is optimal paths move along it towards the unique steady state the results also hold when there are several consumers 2003 elsevier b v all rights reserved

the welfare implications of climate change policy abstract the response to three different climate change policies is measured within a general equilibrium model of world output technological change greenhouse gas emissions and climate driven changes in productivity the proposed policies including an approximation to the kyoto protocol are shown to differ greatly in how they mitigate climate change support economic growth and allocate rents across generations benefits of alternative policies relative to the status quo do not necessarily accrue to the generations that bear the costs the results also show that the chosen rent distribution rule has a profound effect on policy evaluation in particular policies which allocate rents on a per capita basis are shown to be systematically welfare preferred to situations where emissions rights are grandfathered to emitting firms this implies that both the optimal level of emissions and the welfare cost of reaching a given target of emissions or atmospheric concentration would be lower under a per capita allocation of emissions permits or carbon tax revenues

the natalist bias of pollution control for a given technology two ways are available to achieve low polluting emissions reducing production per capita or reducing population size this paper insists on the tension between the former and the latter controlling pollution either through pigovian taxes or through tradable quotas schemes encourages agents to shift away from production to tax free activities such as procreation and leisure this natalist bias will deteriorate the environment further entailing the need to impose ever more stringent pollution rights per person however this will in turn gradually impoverish the successive generations population will tend to increase further and production per capita to decrease as the generations pass one possible solution consists in capping population too

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

efficiency of conservationist measures an optimist viewpoint abstract we consider an economy with a consumer good capital a natural resource that provides amenity values and heterogeneous overlapping generations we compare a benchmark grandfathering policy that ensures efficiency through privatization with a policy of enforced resource conservation it is shown that i conservationist measures do not cause any pareto inefficiency irrespective of whether they pass a cost benefit test moreover it is shown that ii there exist pareto optimal allocations that can only be reached through resource conservation and not through competitive markets irrespective of compensating income transfers finally iii equivalence is demonstrated between strict resource conservation and non dictatorship of the present generations over future generations as formalized in chichilnisky s sustainable welfare function the results are shown to hold in both a first best and a second best setting

tax subsidy policies toward vector borne infectious diseases abstract vector borne diseases especially rife in poor countries pose sectoral tax subsidy issues preventions and therapies mitigate these diseases in a numerical optimization model combining dynamic epidemiology and economics the medical distinction between prevention and therapy does not distinguish economic properties of preventions and therapies some interventions increase and others decrease moving to the steady state depending on the utility function the targeting of interventions and the disease process interventions display negative own price but indeterminate cross price effects juxtaposing the social planner s with decentralized choices quantifies externalities and shows how subsidies implement the first best one prevention and the therapy are equally subsidized

entitlements missing markets and environmental uncertainty reply abstract at one level dore and ward seem intent on immunizing received doctrine they say that i did not prove that rights violated nozick s principles of justice and that i did not prove that missing markets were the problem more telling they allege i did not prove that my story was better than the particular story favored by dore and ward that is they argue that there is an alternative approach based on the theory of public economics which is indeed operational 3 they then use the bulk of their comment to explain and defend this alternative model they hope to convince the reader that the model of public economics survives intact in the face of my alternative model to the extent that their model allows one to define the problem away it is not difficult to see why they find it so compelling more seriously dore and ward fail to make a coherent argument about the concept of rights and duties and the logic of a particular rights structure that happens to prevail they seem concerned that my article was tampering with some sacred social construct the status quo rights structure and that my article threatened the received wisdom of both public economics and paretian walrasian bliss indeed theirs seems to be a genuine fear that if economists release their grip on the certitude of received orthodoxy the floodgates will be open to all manner of bumbling regulators seeking to shift rights and wealth positions across generations my article is apparently threatening because it seems to suggest that the received wisdom may at times be misleading

the effects of ageing and an environmental trust fund in an overlapping generations model on carbon emission reductions most currently employed integrated assessment models for climate change are of a dynastic nature they employ the ramsey rule linking the interest rate economic growth and the rate of pure time preference this paper argues that although a dynastic framework might be convenient for economic analysis it is restrictive and can be misleading overlapping generations models which do not employ the ramsey rule are more flexible and may give results different from those derived from dynastic models with the integrated assessment model alice 2 0 it is shown how various assumptions on demographic change and public institutions can affect the interest rate thereby influencing the efficient greenhouse gas emission reductions it is concluded that dynastic integrated assessment models are in many respects inappropriate for providing policy makers with quantitative figures about the costs of carbon dioxide emissions and their desirable reduction levels 2001 elsevier science b v all rights reserved

overlapping generations or infinitely lived agents intergenerational altruism and the economics of global warming do we need an overlapping generations model for the economics of global warming to answer this question an infinitely lived agent ila approach and an overlapping generations olg model are contrasted ila and olg can be viewed as polar representations of intergenerational altruism with ila an immortal agent acts through his investment savings decisions as trustee on the behalf of the future generations with olg agents need not behave altruistic they simply save during working years and dissave completely during retirement nevertheless ila and olg must not differ in their implication for greenhouse policy greenhouse gas abatement is a straightforward alternative to physical capital formation and even without altruism each age cohort has an incentive to provide current abatement in order to reduce future damages attributable to climate change indeed under reasonable assumptions and parameter values our simulations reveal such an invariance result provided carbon taxes are the only policy tool and tax revenues are recycled through socially mandated rules projections of economic growth climate change and energy consumption are only insignificantly affected by the choice of approach

a measure of sustainable national income for the netherlands abstract we present calculations on the sustainable national income sni indicator first proposed by hueting which corrects net national income nni for the costs to bring back environmental resource use to a sustainable level using an applied general equilibrium age model specifying 27 production sectors we calculate different variants of sni for the netherlands in 1990 given a set of pre determined sustainability standards the age model is extended with emissions and abatement cost curves based on large data sets for nine environmental themes the model combines the advantages of a top down approach the age model with the information of a bottom up approach the environmental data and data on emissions reductions costs the presented numerical results show that in 1990 dutch sni is about 50 below nni though many uncertainties are still present in the data and the model the enhanced greenhouse effect is the most expensive environmental theme

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

environmental regulations and the problem of sustainability moving beyond market failure abstract the standard metaphor of market failure is an impediment to the crafting of environmental policy that can escape policy lock in sustainability requires a policy process that can avoid this lock in sustainability concerns the creation of dynamic human processes that can respond to indeed anticipate unanticipated feedback from biological processes

stabilizing greenhouse gas emissions assessing the intergenerational costs and benefits of the kyoto protocol the costs and benefits current and future generations incur as the result of climate change or an environmental control policy are often confounded with other objectives such as generational discounting or optimal policy design this paper uses a consumption equivalent measure to simulate the loss or gain of consumption independent of these confounding objectives the findings suggest that the costs associated with an emissions stabilization program are relatively large for current generations and continue to increase over the next 100 years the first generation to actually benefit from the stabilization program is born early during the 24th century

an overlapping generations model of climate economy interactions a numerically calibrated overlapping generations model of climate change and the world economy is examined in this paper in the absence of intergenerational transfers efficient rates of greenhouse gas emissions abatement rise from 16 in the present to 25 in the long run while mean global temperature increases by 7 40c relative to the preindustrial norm a utilitarian optimum which attaches equal weight to each generation s life cycle utility yields abatement rates that rise from 48 to 89 with a long run temperature increase of 3 40c a second best utilitarian path in which intergenerational transfers are by assumption institutionally infeasible also supports stringent abatement measures i introduction the infinitely lived agent framework pioneered by frank ramsey 1928 has emerged as a central structure in the economics of climate change as characterized by ipcc 1996 working group iii climate change occurs when anthropogenic emissions of greenhouse gases principally carbon dioxide but also chlorofluorocarbons methane nitrous oxide and water vapor contribute to long term increases in mean global temperature potentially disrupting ecological systems and climate dependent production activities the best known study on the economics of this subject is nordhaus 1994 dynamic model of climate and the economy dice which incorporates assumptions regarding the costs and benefits of greenhouse gas emissions in a standard one sector growth model in nordhaus analysis a 50 reduction in greenhouse gas emissions would reduce gross world output by 0 93 a doubling of greenhouse gas concentrations relative to the preindustrial norm which is expected to occur by the middle of the twenty first century would reduce output by

what drives public acceptance of reforms longitudinal evidence from a dutch pension reform governments often find it hard to pursue economic reforms even if they eventually will benefit a majority of voters the literature remains inconclusive about the reasons for this some scholars on the one hand stress the role of distributional conflicts between different classes for instance dividing the young and the old in the case of pay as you go pensions others have highlighted that resistance to reform is rather broad based owing to the public s poor understanding of the need for reform this paper attempts to disentangle the drivers of public acceptance of reform by means of a case study the 2012 increase of the dutch statutory retirement age from 65 to 67 we exploit a unique longitudinal dataset on the attitudes of dutch households respecting pension reform in the 2003 2013 period our findings offer various new insights first we find that education occupational status and psychological traits were the most systematic drivers of reform preferences while age had a limited impact second and significantly we find that the year fixed effects were the main drivers of respondents acceptance of reform we interpret the pattern of the year coefficients as evidence of a collective learning process whereby households gradually updated their expectations and reform preferences in light of new information

correcting the climate externality pareto improvements across generations and regions many argue that the present generation must reduce consumption to mitigate future climate change however as significant climate change is due to market failure the correction of market failures by definition gives rise to the possibility of pareto improvements in this paper we examine the implications of pareto improvements both within and across generations we employ the representative consumer model rice 10 a global model including different regions to see how we could potentially distribute any benefits across and within generations such that nobody loses the model shows that different combinations of present and future consumption along the pareto improving frontier yield different combinations of capital investment and emissions we also calculate a conventional social optimum while the social optimum by definition is on the pareto efficiency frontier it is not necessarily on the pareto improving segment of this frontier total emissions and hence temperature change vary significantly across different pareto improving scenarios it obviously matters which generations get the utility gain and one of our results is that for pareto improvements where none of the gain goes to the distant future and allowing transfers total emissions will be higher than in the social optimum even without any welfare gain to the distant future total emissions may be lower in the pareto improving scenarios we have considered than under the social optimum if transfers are not permitted moreover in this case carbon taxes differ substantially across regions for all pareto improvements

voters commitment problem and reforms in welfare programs when will a vote seeking government pursue unpopular welfare reforms that are likely to cost it votes using a game theoretical model we show that a government enacts reforms that are unpopular with the median voter during bad economic times but not during good ones the key reason is that voters cannot commit to re elect a government that does not reform during bad times this voters commitment problem stems from economic voting i e voters tendency to punish the government for a poorly performing economy the voter commitment problem provides an explanation for the empirical puzzle that governments sometimes enact reforms that voters oppose

resolving intergenerational conflict over the environment under the pareto criterion abstract climate change policies create intergenerational winners and losers because the costs come first and the benefits later in such cases kaldor hicks cost benefit analysis seeks potential pareto improvements by showing the hypothetical potential for the winners to compensate the losers via lump sum transfers in their absence once a costly climate policy is actually implemented it unleashes distortions and general equilibrium effects rendering unclear whether kaldor hicks potential improvements lead to actual improvements we study policies which once implemented would pass the pareto test that no generation subsequent to policy action be made worse off than before we develop a stylized climate economy model in which production by the current generation generates pollution which damages production for future generations over time the business as usual bau economy gets increasingly polluted consumption falls and generational welfare levels decline a government introduces costly pollution abatement and finances it via distorting taxes and the sale of debt green bonds pollution levels start to decline generating downstream welfare gains which may be taxed without hurting anyone in a pareto sense to help finance the policy and pay off the debt along the transition every generation faces less pollution consumes more and is happier than if life had continued in the bau world

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

natural capital and sustainability abstract this paper develops and rigorously analyses a model describing the optimal use of natural capital in a utilitarian framework natural capital is treated as an aggregate including exhaustibles renewables and environmentals performing several functions it is found that it converges to a steady state in which it is kept constant by simultaneous investments and use

intergenerational equity discounting and the role of cost benefit analysis in evaluating global climate policy when public policies with impacts far into the future are being debated the question inevitably is raised whether cost benefit analysis which discounts future costs and benefits is not biased against future generations and whether if such discounting is appropriate at all a lower rate should be used to avoid such bias the debate on global climate change is no exception this paper sketches and analyses the welfare foundations of cost benefit analysis and from this perspective analyses the role of cost benefit analysis in the climate policy debate particularly with reference to intergenerational effects the paper concludes that the cost benefit criterion cannot provide a definitive basis for deciding whether we should commit to a longer term programme to moderate climate change the issues of intergenerational equity are not that global climate change will significantly lower the gnp of future generations but relate to the possibility of science fiction like changes in the planet that will produce catastrophic effects in the future and the typical way in which the cost benefit problem is posed obscures the basic choices that we should be evaluating

conservationist government policies and intergenerational equity in an overlapping generations model with renewable resources abstract this paper shows that in overlapping generations models incorporating renewable natural resources competition may lead to perpetually declining living standards in environments in which it is technically feasible to achieve intergenerationally equitable distributions of consumption first and second best conservationist government policies are examined these include forced nationalization of the entire stock of natural capital government open market purchases and sales of natural capital taxation of industrial use of resources and subsidies to private investments in natural capital

uncertain lifetime consumption and dissaving in retirement this paper asks whether the continued accumulation or mild dissaving observed among the retired can be explained by uncertain lifetime in the absence of annuities after an initial period influenced by borrowing constraints under constant relative risk aversion uncertain lifetime depresses consumption by a proportion increasing with age if the elasticity of intertemporal substitution in consumption is small illustrative computations based on actual income and survival data show that plausible elasticities are sufficiently small to give this effect the reduction in consumption is large enough to explain much of the lack of decumulation by the elderly

the social construction of an imperative why welfare reform happened in denmark and the netherlands but not in germany this article seeks to explain why denmark and the netherlands made dramatic progress reforming their welfare systems in the 1990s and why germany had a relatively slow start some possible explanations found to be incomplete are institutional differences in welfare programs the uniqueness of circumstances for example german unification and the balance of political power in governing institutions an important part of the puzzle is an increasing perception of the need to reform that was more widespread in denmark and the netherlands the social construction of an imperative to reform in these countries generated a political consensus that was elusive in germany but that may be developing under gerhard schroder s government

long term substitutability between environmental and man made goods abstract substitutability between environmental and man made goods plays a major role in the sustainability debate the notion of substitutability covers a continuous spectrum with perfect substitutability at one end and poor substitutability at the other in this paper it is shown that if economic growth sustains a sharp distinction emerges between perfect and poor substitutability without any intermediate interpretation of substitutability if poor substitutability prevails environmental resources will eventually constitute the major part of total consumption value we relate our results to baumol s disease and assess the implications of this phenomenon for the compensation of environmental losses

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

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

the damage costs of climate change toward more comprehensive calculations it is argued that estimating the damage costs of a certain benchmark climate change is not sufficient what is needed are cost functions and confidence intervals although these are contained in the integrated models and their technical manuals this paper brings them into the open in order to stimulate discussion after briefly reviewing the benchmark climate change damage costs region specific cost functions are presented which distinguish tangible from intangible losses and the losses due to a changing climate from those due to a changed climate furthermore cost functions are assumed to be quadratic as an approximation of the unknown but presumably convex functions results from the damage module of the integrated climate economy model fund are presented next uncertainties are incorporated and expected damages are calculated it is shown that because of convex loss functions and right skewed uncertain ties the risk premium is substantial calling for more action than analysis based on best guess estimates the final section explores some needs for further scientific research

a positive theory of social security in many countries social security accounts for a large fraction of the government budget why is this so given that at any point in time the number of recipients of social security benefits is smaller than the number of contributors in the overlapping generations model studied in this paper all individuals currently alive vote on social security in every period in equilibrium the size of social security is larger the greater is the proportion of elderly people in the population and the greater is the inequality of pre tax income within each generation both predictions of the theory are supported by the empirical evidence in cross country data

self enforcing intergenerational social contracts for pareto improving pollution mitigation we consider in an overlapping generations model with an environmental externality a scheme of contracts between any two successive generations under each contract agents of the young generation invest a share of their labor income in pollution mitigation in exchange for a transfer in the second period of their lives the transfer is financed in a pay as you go manner by the next young generation different from previous work we assume that the transfer is granted as a subsidy to capital income rather than lump sum we show that the existence of a contract which is pareto improving over the situation without contract for any two generations requires a sufficiently high level of income in a steady state with social contracts in each period the pollution stock is lower compared to a steady state without contracts analytical and numerical analysis of the dynamics under nash bargaining suggests that under reasonable conditions also steady state income and welfare are higher delaying the implementation of a social contract for too long or imposing a contract with too low mitigation can be costly net income may inevitably fall below the threshold in finite time so that pareto improving mitigation is no longer possible and the economy converges to a steady state with high pollution stock and low income and welfare in the second part of the paper we study a game theoretic setup taking into account that credibly committing to a contract might not be possible we show that with transfers granted as a subsidy to capital income there exist mitigation transfer schemes which are both pareto improving and give no generation an incentive to deviate from any of its contracts even in a dynamically efficient economy social contracts coexist with private savings