Pricing climate change

Abstract

In developing the basis on which climate change should be priced, I do five things. First, I review the ethical foundations for valuing future consumption relative to present consumption (i.e. social discount rates). Second, I report that the criterion for both assessing and prescribing economic policies should not be an economy's GDP, but an inclusive measure of an economy's wealth adjusted for the distribution of wealth. Third, I apply the resulting analysis to the problem of pricing carbon concentration in the atmosphere. I give prominence to future uncertainties. Fourth, I show that the existing models of human behaviour on the basis of which these questions have been analysed by economists have serious deficiencies, in as much as the idea of personhood embodied in them has been built on the psychology of confirmed egotists. Fifth, I sketch the motivations of a social being and show how the altered specification of the human person affects the social price of climate change.