Long-run Future Research Articles

Why Europe Must End Its 30-Year Digital Winter to Ensure Its Long-Run Future

Why Europe Must End Its 30-Year Digital Winter to Ensure Its Long-Run Future

The epistemic challenge to longtermism

Longtermists claim that what we ought to do is mainly determined by how our actions might affect the very long-run future. A natural objection to longtermism is that these effects may be nearly impossible to predict—perhaps so close to impossible that, despite the astronomical importance of the far future, the expected value of our present actions is mainly determined by near-term considerations. This paper aims to precisify and evaluate one version of this epistemic objection to longtermism. To that end, I develop two simple models for comparing ‘longtermist’ and ‘neartermist’ interventions, incorporating the idea that it is harder to make a predictable difference to the further future. These models yield mixed conclusions: if we simply aim to maximize expected value, and don’t mind premising our choices on minuscule probabilities of astronomical payoffs, the case for longtermism looks robust. But on some prima facie plausible empirical worldviews, the expectational superiority of longtermist interventions depends heavily on these ‘Pascalian’ probabilities. So the case for longtermism may depend either on plausible but non-obvious empirical claims or on a tolerance for Pascalian fanaticism.

The long run and the short run: temporalities of gender and development

ABSTRACT This article examines the multiple temporalities of gender and development work through the experiences of gender experts in international institutions of governance. It delineates the immediate encounters between different actors involved in negotiating international conventions and the short-term accountabilities built into development projects and humanitarian assistance. It then maps them onto narratives of the future to show how they produce the appearance of a linear connection between the present and the future, and generate hopes for a long-run future while blurring the fact that the latter never seems to arrive. What holds this multiplicity together is a politics of hope and waiting, which reveals and sustains the power dynamics in these organizations and give clues about the ambivalent relationship between gender and development planning, and large-scale progress toward gender equality.

From optimism to pessimism: The stability of the Euro FX market in the short and long run

Abstract. We review the EU’s actions over the euro’s lifetime; since its introduction thru to the populist uprising of the late 2010s. The euro was introduced on a wave of optimism throughout the EU, although based on a compromised monetary agreement. Essentially, underlining the crisis and movement from optimism to pessimism in the EU integration road. Thus, it is hard to analyse the euro without reviewing the theories influencing this road. Furthermore, we analyse the long and short-run market stability of the euro FX market using the variance bound model of (Fakhry & Richter, 2018). However, it is difficult to explain the market analysis without referencing behavioural finance. Thus we use key elements of behavioural finance, such as the opposite scale behaviours of greed and fear, to fully explain the timeline analysis of the euro FX market stability in both the long and short runs. At first glance, the result was unexpected due to the critical factor that the market was significantly volatile in the long run; despite conventional wisdom dictating that in the long-run, the financial markets are generally stable. One possible explanation is that the market participants are fearful of the long-run future of the Euro. Keywords. Behavioural Finance, EU Integration, Euro, Euro Crises, Long/Short Run, Market Stability. JEL. C58, D81, G01, G02, H77.

Alpha Natural Resources

It was June 2010, and Kevin Crutchfield, CEO of Alpha Natural Resources, and his team of senior executives were facing several critical issues for the coal business. These issues were top of mind as he prepared a presentation he was expected to deliver the following Monday to ANR shareholders at the annual meeting. For fiscal year 2009, the company had revenues of $2,495 million, an increase of 1% compared with 2008, and $58 million in net income. This was relatively good considering the economic environment, but the company's long-run future was what had Crutchfield really concerned. Excerpt UVA-F-1631 Nov. 30, 2011 Alpha Natural Resources It was June 2010, and Kevin Crutchfield, CEO of Alpha Natural Resources (ANR), and his team of senior executives were facing several critical issues for the coal business. These issues were top of mind as he prepared a presentation he was expected to deliver the following Monday to ANR shareholders at the annual meeting. For fiscal year 2009, the company had revenues of $ 2,495 million, an increase of 1% compared with 2008, and $ 58 million in net income. This was relatively good considering the economic environment, but the company's long-run future was what had Crutchfield really concerned. ANR was the third-largest coal producer in the United States, with a production capacity of close to 100 million tons of steam and metallurgical coal. Although it was a young company, founded in 2002, it had become through acquisitions one of the largest players in the coal industry, employing almost 6,400 people and operating primarily in five states—Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. During the previous few years, environmental concerns related to greenhouse gases (GHGs) had grown. Society's desire to reduce carbon dioxide (CO2) emissions from coal-fired power plants was putting pressure on the U.S. Congress to pass legislation addressing this issue. Two proposed cap-and-trade bills had been discussed, and if passed, either of these bills would mean a radical change in the coal business. Some of the more severe estimates forecast that utilities' demand for coal in the United States could drop 80% by 2030. . . .

State (wealth)-dependent discounting of future resources

I derive a function to represent how consumers discount the value of future resources, a function which depends on the amount (state) of presently available resources (wealth) relative to expected income in the long-run future. When presently available resources are scarce in the sense that consumers are borrowing constrained, this discount function approaches zero, implying that we put zero weight on the value of future resources and are concerned entirely about having sufficient resources for the present. When the amount of presently available resources relative to expected income is ample, this discount function approaches or approximates a constant future discount factor in a timeseparable expected utility function. The wealth-dependent discount function is positively related to aversion of future risks in consumption resources at low and moderate levels of risk aversion, so that we are predicted to discount future resources less as we become more risk averse.

Sustainable markets with short sales

Market objectives can conflict with long-term goals. Behind the conflict is the impatience axiom introduced by T. Koopmans to describe choices over time. The conflict is resolved here by introducing a new concept, sustainable markets. These differ from Arrow-Debreu markets in that traders have sustainable preferences and no bounds on short sales. Sustainable preferences are sensitive to the basic needs of the present without sacrificing the needs of future generations and embody the essence of sustainable development (Chichilnisky 1996a, b). Theorems 1 and 2 show that limited arbitrage is a necessary and sufficient condition describing diversity and ensuring the existence of a sustainable market equilibrium where the invisible hand delivers sustainable as well as efficient solutions (Chichilnisky 1991, 1995; Chichilnisky and Heal 1998). In sustainable markets prices have a new role: they reflect both the value of instantaneous consumption and the value of the long-run future. The latter are suitably ambiguous, they are connected to the independence of the axiom of choice at the foundations of mathematics (Godel 1940).

On the Relation between Dual-Rate Discounting and Substitutability

To justify substantial emission reductions, recent literature on cost-benefit analysis of climate change suggests discounting environment consumption with an environmental discount rate instead of a consumption discount rate that is usually used in cost-benefit analysis. The present study clarifies that whether or not this dual-rate discounting approach succeeds in justifying substantial emission reductions depends on whether or not environment and goods consumption are substitutes in the Hicks-Allen sense and in the Edgeworth-Pareto sense (substitutes in the Hicks-Allen sense implies the Hicksian goods demand to be increasing in the relative price of environmental goods, while substitutes in the Edgeworth-Pareto sense implies the marginal utility of goods consumption to be decreasing in environment consumption). Moreover, a low intratemporal elasticity of substitution between environment and goods consumption within a period contributes to a low environmental discount rate in comparison to the consumption discount rate, while a low intertemporal elasticity of substitution between composite consumption of different periods contributes to declining discount rates over time. Paper submitted to the special issue “Discounting the Long-Run Future and Sustainable Development”

Avoiding Extinction: Equal Treatment of the Present and the Future

AbstractEqual treatment for the present and the future was required in two axioms introduced in the articles by Chichilnisky of the years 1996 and 1997. These articles provide a characterization of the decision criterion that satisfies the axioms and shows that the two axioms are equivalent to physical limits in the long-run future. The author proves that maximizing discounted utility with a long-run survival constraint is equivalent to maximizing a criterion that treats equally the present and the future. The equal treatment axioms are therefore the essence of sustainable development. The “weight”λgiven to the long-run future is here identified with the marginal utility of the environmental asset along a path that narrowly misses extinction. An existence theorem is also provided for optimizing according to the welfare criterion that treats equally the present and the future. The author shows that no prior welfare criteria satisfy the axioms for sustainable development introduced in her article of the year 1996.

The Safe Minimum Standard of Conservation and Environmental Economics

Critics within environmental economics argue that the mainstream paradigm is not sufficiently cautious to support sound decision making about the long-run future of environmental resources. Rather than basing choices on benefits and costs, these upstarts, beginning with Ciriacy-Wantrup* (1968), argue that decision-makers should consider imposing a safe minimum standard of conservation (hereafter the SMS). The SMS has intuitive appeal. Where loss or degradation of environmental resources could have large adverse economic consequences, safety-first makes common sense. The SMS continues to be discussed in the professional literature3 and has found its way into some textbook^.^ However, the SMS has not achieved wide acceptance among environmental economists.

An Axiomatic Approach to Sustainable Development

The paper proposes two axioms that capture the idea of sustainable development and derives the welfare criterion that they imply. The axioms require that neither the present nor the future should play a dictatorial role. Theorem 1 shows there exist sustainable preferences, which satisfy these axioms. They exhibit sensitivity to the present and to the long-run future, and specify trade-offs between them. It examines other welfare criteria which are generally utilized: discounted utility, lim inf. long run averages, overtaking and catching-up criteria, Ramsey's criterion, Rawlsian rules, and the criterion of satisfaction of basic needs, and finds that none satisfies the axioms for sustainability.Theorem 2 gives a characterization of all continuous independent sustainable preferences. Theorem 3 shows that in general sustainable growth paths cannot be approximated by paths which approximate discounted optima. Proposition 1 shows that paths which maximize the present value under a standard price system may fail to reach optimal sustainable welfare levels, and Example 4 that the two criteria can give rise to different value systems.

What is Sustainable Development

The paper proposes two axioms that capture the idea of sustainable devel­ opment and derives the welfare that they imply. The axioms require that neither the present nor the future should play a dictatorial roJe in society's choices over time. Theorem 1 shows there exist sustainable preferences, which satisfy these axioms. They exhibit sensitivity to the present and to the long-run future, and specify trade­ offs between them. lt exarnines other welfare criteria which are generally utilized: discounted utility, !im inf, long run averages, overtaking and catching-up criteria, Ramsey's criterion, Rawlsian rules, and the of satisfaction of basic needs, and finds that none satisfies the axioms for sustainability. Theorem 2 gives a characterization of all continuous sustainable preferences. Theorem 3 studies a Standard dynarnical system representing the growth of a renew­ able resource. Sustainable preferences are shown to be a natural extension of the equal treatment criterion for finitely many generations, in thesensethat the opti­ mal solutions for such preferences approach the turn pike of an equal-weight finite horizon optirnization problern as the horizon increases. Theorem 3 also shows that sustainable preferences match the experimental evidence in these cases, in the sense that they imply a rate of discount that decreases and approaches zero as time goes to infinity. Theorem 4 exhibits the differences between the optimal paths according to sustainable preferences and discounted utilitarianism in an extension of the classi­ cal Hotelling problern of the optimal depletion of an exhaustible resource. Theorem 5 shows that sustainable optima can be quite different from discounted optima, no matter how small is the discount factor. Subsequent examples show the implications 1 This paper was prepared for an invited presentation at a seminar on Reconsideration of Yalues at the Stanford Institute for Theoretical Economics, organized by K. J. Arrow in July 1993. lt was also an in­ vited presentation at the Intergovemamental Panel on Climate Change (IPCC) Seminar in Montreux, Switzerland, March 1994, at a Seminar on Inconmensurability of Values at Chateaux du Baffy, Nor­ mandy, April 1994, and at the Graduale School of Business of Stanford University in May 1994. 2 UNESCO Chair in Mathematics and Economics and Director, Program on Information and Resources,

Avoiding extinction: the future of economics

New physical constraints emerged in the 20th century and are changing the decision criteria used until now. Two optimisation problems are equivalent: (1) maximising discounted utility with a long-run survival constraint and (2) maximising a new type of utility that treats the present and future equally. The latter originates in normative axioms introduced by the author in Chichilnisky (1996a), which capture the essence of sustainable development. The article shows that in the economics of the future, normative and positive goals converge: the axioms representing what we would like merge with what will be observed. The 'weight' given to the long-run future is identified with the marginal utility of an environmental asset along a path that narrowly avoids extinction. No prior welfare criteria satisfy the axioms for sustainable development introduced by Chichilnisky (1996a; 1997). The implied decision criteria have practical implications for new forms of cost-benefit analysis, choices under uncertainty, optimal extraction of renewable resources and the optimisation of investment and trade. These preferences have been tested experimentally (Chanel and Chichilnisky, 2008) and identify the limits of nonparametric econometrics (Chichilnisky, 2009c).

Implementing Futurism in Independent Hotel and Motel Service Planning

This paper is largely conceptual but also somewhat empirical in nature. It provides a discussion of possible contributions of futurism to independent hotel and motel service planning. The coverage includes a description of futurism, its contributions to service planning, the utilization of futurism in the industry, and alternative methods for developing long-term scenarios. Further, it sets forth the outcome of an inquiry into the extent of use of this method by independent hotel and motel managers. The inquiry indicates that many of these managers do not place great emphasis on the long-run future when they are involved in service planning.

PE Ratios, PEG Ratios, and Estimating the Implied Expected Rate of Return on Equity Capital

I describe a model of earnings and earnings growth and I demonstrate how this model may be used to obtain estimates of the expected rate of return on equity capital. These estimates are compared with estimates of the expected rate of return implied by commonly used heuristics—viz., the PEG ratio and the PE ratio. Proponents of the PEG ratio (which is the price-earnings [PE] ratio divided by the short-term earnings growth rate) argue that this ratio takes account of differences in short-run earnings growth, providing a ranking that is superior to the ranking based on PE ratios. But even though the PEG ratio may provide an improvement over the PE ratio, it is arguably still too simplistic because it implicitly assumes that the short-run growth forecast also captures the long-run future. I provide a means of simultaneously estimating the expected rate of return and the rate of change in abnormal growth in earnings beyond the (short) forecast horizon—thereby refining the PEG ratio ranking. The method may also be used by researchers interested in determining the effects of various factors (such as disclosure quality, cross-listing, etc.) on the cost of equity capital. Although the correlation between the refined estimates and estimates of the expected rate of return implied by the PEG ratio is high, supporting the use of the PEG ratio as a parsimonious way to rank stocks, the estimates of the expected rate of return based on the PEG ratio are biased downward. This correlation is much lower and the downward bias is much larger for estimates of the expected rate of return based on the PE ratio. I provide evidence that stocks for which the downward bias is higher can be identified a priori.

PE Ratios, PEG Ratios, and Estimating the Implied Expected Rate of Return on Equity Capital

I describe a model of earnings and earnings growth and I demonstrate how this model may be used to obtain estimates of the expected rate of return on equity capital. These estimates are compared with estimates of the expected rate of return implied by commonly used heuristics - viz., the PEG ratio and the PE ratio. Proponents of the PEG ratio (which is the price-earnings (PE) ratio divided by the short-term earnings growth rate) argue that this ratio takes account of differences in short-run earnings growth providing a ranking that is superior to the ranking based on PE ratios. But even though the PEG ratio may provide an improvement over the PE ratio, it is arguably still too simplistic because it implicitly assumes that the short-run growth forecast also captures the long-run future. I provide a means of simultaneously estimating the expected rate of return and the rate of change in abnormal growth in earnings beyond the (short) forecast horizon - thereby refining the PEG ratio ranking. The method may also be used by researchers interested in determining the effects of various factors (such as disclosure quality, cross-listing, etc.,) on the cost of equity capital. Although the correlation between the refined estimates and estimates of the expected rate of return implied by the PEG ratio is high supporting the use of the PEG ratio as a parsimonious way to rank stocks, the estimates of the expected rate of return based on the PEG ratio are biased downwards. This correlation is much lower and the downward bias is much larger for estimates of the expected rate of return based on the PE ratio. I provide evidence that stocks for which the downward bias is higher can be identified a priori.

From Decision Support to Decision Automation: A 2020 Vision

The authors discuss the long-run future of decision support systems in marketing. They argue that a growing proportion of marketing decisions can not only be supported but may also be automated. From a standpoint of both efficiency (e.g., management productivity) and effectiveness (e.g., resource allocation decisions), such automation is highly desirable. The authors describe how model-based automated decision-making is likely to penetrate various marketing decision-making environments and how such models can incorporate competitive dynamics. For example, the authors foresee that close to full automation can ultimately take place for many decisions about existing products in stable markets. Partial automation could characterize decision making for new products in stable markets and existing products in unstable markets.

An axiomatic approach to sustainable development

The paper proposes two axioms that capture the idea of sustainable development and derives the welfare criterion that they imply. The axioms require that neither the present nor the future should play a dictatorial role. Theorem 1 shows there exist sustainable preferences, which satisfy these axioms. They exhibit sensitivity to the present and to the long-run future, and specify trade-offs between them. It examines other welfare criteria which are generally utilized: discounted utility, lim inf. long run averages, overtaking and catching-up criteria, Ramsey's criterion, Rawlsian rules, and the criterion of satisfaction of basic needs, and finds that none satisfies the axioms for sustainability. Theorem 2 gives a characterization of all continuous independent sustainable preferences. Theorem 3 shows that in general sustainable growth paths cannot be approximated by paths which approximate discounted optima. Proposition 1 shows that paths which maximize the present value under a standard price system may fail to reach optimal sustainable welfare levels, and Example 4 that the two criteria can give rise to different value systems.

HIstorical perspective and environmental cost-benefit analysis

This article is concerned with the analytical as well as political strengths and weaknesses of the application of cost-benefit techniques in cases of environmentally sensitive projects, and highlights the historical perspective against which the rapid development of the modern age can be evaluated. When environmental conflict is considered in its historical/futurological dimension, a more deterministic point of view becomes acceptable. This point of view entails the notion that micro-environmental decision makers are compromised by macro-environmental parameters-both technological change and economic and demographic momentum-over which they have no control. Environmental policy, therefore, appears to call for macroenvironmental direction. In the absence of such direction, cost-benefit economists may find themselves forced to provide the right solutions for the wrong problems, with perhaps disconcerting prospects for the long-run future of the man-nature relationship.

Forces Shaping the Long-run Future and the Implications for Global Political and Security Issues

Forces Shaping the Long-run Future and the Implications for Global Political and Security Issues