Discounting and relative prices |
| |
| Authors: | Michael Hoel Thomas Sterner |
| |
| Institution: | (1) Department of Economics, University of Oslo, P.O. Box 1095, 0317 Oslo, Norway;(2) Department of Economics, University of Goteborg, Goteborg, Sweden |
| |
| Abstract: | Environmentalists are often upset at the effect of discounting costs of future environmental damage, e.g., due to climate
change. An often-overlooked message is that we should discount costs but also take into account the increase in the relative
price of the ecosystem service endangered. The effect of discounting would thus be counteracted, and if the rate of price
rise of the item was fast enough, it might even be reversed. The scarcity that leads to rising relative prices for the environmental
good will also have direct effects on the discount rate itself. The magnitude of these effects depends on properties of the
economy’s technology and on social preferences. We develop a simple model of the economy that illustrates how changes in crucial
technology and preference parameters may affect both the discount rate and the rate of change of values of environmental goods.
The combined effect of discounting and the change of values of environmental goods is more likely to be low – or even negative
– the lower the growth rate of environmental quality (or the larger its decline rate), and the lower the elasticity of substitution
between environmental quality and produced goods. |
| |
| Keywords: | |
| 本文献已被 SpringerLink 等数据库收录！ |
|
