Now or Never: Environmental Protection under Hyperbolic Discounting

Ralph Winkler

No 06/60, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In this paper, we extend the well known result that hyperbolically discounting agents tend to postpone costs into the future. In a simple model we show that, without commitment to the ex ante optimal plan, no investment in environmental protection is undertaken over the whole time horizon, no matter whether the decision makers are naive or sophisticated, although investment seems optimal in the long run from every generations point of view. This result questions the application of hyperbolic discounting in cost-benefit analysis and gives rise to concern, as it is consistent with unsatisfactory policy performance in solving long-term environmental problems.

Keywords: environmental policy; environmental protection; hyperbolic discounting; intertemporal decision theory; procrastination; time-(in)consistency (search for similar items in EconPapers)
JEL-codes: D61 D90 Q53 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-10
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Now or Never: Environmental Protection under Hyperbolic Discounting (2009)
Working Paper: Now or Never: Environmental Protection under Hyperbolic Discounting (2009)
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