Working Paper: NBER ID: w14359
Authors: Lawrence H. Summers; Richard J. Zeckhauser
Abstract: Policymaking for posterity involves current decisions with distant consequences. Contrary to conventional prescriptions, we conclude that the greater wealth of future generations may strengthen the case for preserving environmental amenities; lower discount rates should be applied to the far future, and special effort should be made to avoid actions that impose costs on future generations. -- Posterity brings great uncertainties. Even massive losses, such as human extinction, however, do not merit infinite negative utility. Given learning, greater uncertainties about damages could increase or decrease the optimal level of current mitigation activities. -- Policies for posterity should anticipate effects on: alternative investments, both public and private; the actions of other nations; and the behaviors of future generations. Such effects may surprise. -- This analysis blends traditional public finance and behavioral economics with a number of hypothetical choice problems.
Keywords: Policymaking; Environmental Economics; Intergenerational Equity; Discount Rates
JEL Codes: D64; D81; D90; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| greater wealth of future generations (D15) | strengthen the case for preserving environmental amenities (Q26) |
| lower discount rates (E43) | evaluate long-term environmental policies (Q58) |
| uncertainties about potential damages from climate change (Q54) | adjustments in current mitigation strategies (F32) |
| actions taken today (G34) | significant implications for future generations (D15) |
| policymakers' decisions (D78) | avoid imposing costs on future generations (H60) |
| traditional discounting approach (H43) | undervalue the interests of future generations (D15) |