Summary of IF Lectures - PDF

1. lecture reading: What we owe the future main points: the future population is huge trolley problem vs. future generations people today matter (but do they matter more?) ◦The utility for the generations sould remain the same future needs are uncertain ◦How are our choices now goi...

1. lecture reading: What we owe the future main points: the future population is huge trolley problem vs. future generations people today matter (but do they matter more?) ◦The utility for the generations sould remain the same future needs are uncertain ◦How are our choices now going to affect future people? ◦We don't know how much future generations would be ready to pay for climate compensations. ◦We have powerful tools but we don't know yet how to use them. extinction precausion principle: ◦The more uncertain we are, the more we are worried to make any changes in the future. ◦If we know with a big probability that an asteroid is going to hit the eath we can use all the resources now and don't have to save them for later generations, because everything will be destroyed. 2. lecture reading: Theories of intergenerational justice main points: sustainability future needs? resources vs. well being utilitarianism (decreasing marginal utility + social discount rate) Lockean proviso Rawlsian is there a trade off? -> steady state phase expecting on trade offs? distributing resources desiderata value judgements ◦Capture simple ethical views: these are the building blocks of theories of justice ◦example: social welfare increases when all individuals are better off axioms ◦Mathematical formulations of value judgements. axiomatic approach ◦Formulating axioms to interpret value judgements and study their (joint) implications approaches choosing ◦Identifies how society ought to choose for each situation in some domain ◦problem: if you choose one, the others have the value of zero ◦simpler method ◦choosing is a special case of ranking ◦choosing is necessarily situation-specific: choice depends on the situation ranking  ◦Identifies how society ought to rank alternatives in some domain ◦when you rank something there is a range from good to bad ◦more complex, but gives you more information ◦utilitarianism is the only theory you can rank ◦ranking tends to be universal: we search for the optimum consumer theories: similar approaches ◦choice-based (generate choices from preferences) ◦preference-based (generate preferences from choices) social welfare functions formalism of ranking: ◦transitive: when you prefer A over B and B over C you can't prefer C over A ◦complete: including all elements (not sure here) ◦continuous: small changes do not change the ranking much when all the elements are given, it can be representet by a social welfare function puzzling examples How to share a non-renewable resource? ◦It is impossible for something to be egalitarian and sufficient -> we can't divide a specific amount of resources by unlimited generations ◦We need to treat generations differently and thats why we need to discount future generations Consider the axiom that the name of generations do not matter ◦Anonymity tells, that any reshuffling of generations' consumptions is indifferent for the planner ‣ c1: (1,0,1,0,1,0,...), c2: (0,1,0,1,0,1,...), c3: (0,0,1,0,1,0,...) -> equally desirable ◦Because of transitivity c1 and c3 must be indifferent, but that means that the consumptions of some generations (here the first one) is irrelevant -> not efficient ◦efficiency: the more the better 3. lecture reading: Chapter 2 of Stern Review main points: social discount rate (SDR) ◦consumption in the future will be less valuable because people will be richer ◦because of the long term rate of the economy at 2% we expect future generations to be richer ◦the problem of climate change are the externalities (it's a global problem but we only make local changes) -> public intervention is needed, no matter what ◦when de SDR is small, we value the next generations more ◦if a project is cheaper than the discount rate we should take it, if its higher than not decreasing marginal utility inequality risk-insurance pure time discounting risk-uncertainty over time how to use SDR small vs. large projects discounting time and discounting project that involves costs and benefits at different periods -> adopt SDR ◦It converts costs and benefits in the future into current units of account, known as present  values. ‣ However the present value is extremely sensitive to minor alterations to the SDR there might be opinions that we shouldn't discount, but we should still do it the SDR: disagreement Stern (normative stand): SDR of 1.4% ◦for sure benefit of 1000 CHF in 100 years: sacrifice up to 250 CHF today Nordhaus (positive stand): SDR of 4.5% ◦for sure benefit of 1000 CHF in 100 years: sacrifice only 10 CHF today there is a big debate about the appropriate SDR some argue that the SDR should be derived from: ◦Simple Ramsey Rule ‣ possibly, with extensions on uncertainty, risk, inequality, and limited substitutability of non-market goods the SDR: in practice Social Time Preference (STP) approach: ◦Consumption-side approach in which the STP reflects the rate at which society is willing to trade-off consumption today for consumption tomorrow. production-side approach: ◦It measures the societal cost of public investment against the social cost of public funding in a perfectly competitive equilibrium, the two coincide the social welfare calibration of the STP social welfare function: suppose a potential project will create future benefits Bt at time t, so that consumption raises to Ct + Bt current social value of the project p, can be interpreted as the social planner's willingness-to-pay Ramsey Rule: SDR = + (-> is the growth rate of consumption) ◦ : pure rate of time discounting (additional value you give just because they are in the future) ◦ : wealth effet (people are richer if the growth rate is bigger than 0) -> discount the people in the future because they are richer -> the higher the less weight we put on them 4. lecture recap main points is about discounting is about inequality but there is a large disagreement about that discounting in detail ethical defensible? Most people have the opinion, that the shouldn't discount future generations and there might be arguments against it, but we should still do it. contra arguments: ◦Sidgwick: We can't consider the interest of posterity when they seem to conflict with those of existing human beings. The time at which a man exists cannot affect the value of his happiness from a universal point of view. Value of future people can‘t be smaller (anonymity)  ‣ Ramsay agrees: We do not discount later enjoyments in comparison with earlier ones ‣ but Ramsay says that however we have to include a rate of discount pro arguments: ◦Arrow: If there is an investment opportunity only available for the first generation. For each unit sacrificed by them, a perpetual stream of per unit time is generated. If there is no time preference, given any investment, short of the entire income, a still greater investment would be preffered. ◦Koopmans: Considers a world that lasts forver. Choice is based on a preference ordering over infinite-dimensional consumption streams. If the ordering is continuous and also sensitive (if one stream is never worse than another and is better at one or more time points, then it must be strictly preffered), it must display impatience. ◦We haven't found the perfect discount rate yet. It should show how WE value the future. Issue that exponential discounting workds in some range and then how it continues it goes extreme quick to minimal amounts. a justification strongest defense of discounting in general and exponentially-discounted utilitarianism are: ◦Koopmans and Diamond Diamond: ◦he shows that there is no social welfare function that satisfies ◦efficiency -> more consumption is better ◦finite anonymity -> reshuffling consumptions is a matter of indifference Koopmans: ◦Rather than constructing a social welfare function by summing up each generation's (positive) utility, Koopmans inverts the analysis and derives the utility function of each generation and the constant discount factor from axioms on the planner's preference. Koopmans Postulates (-> we dont have to define it) Continuity ◦Means that a small variation in the consumption stream does not lead to drastic changes in the level of social welfare. Sensitivity ◦Tells that the level of consumption of the first generation matters. ◦debate: Intertemporal preferences between two periods remain the same even if we shunt those two periods further ahead in time. Non-complementarity ◦Imposes that the assessment of the future is independent of a common present and that the assessment of the present is independent of a common future. ◦debate: Inequality attitudes between any two periods cannot depend on what happens in some other period. Stationarity ◦Asks that when you to eliminate a common first period consumption, the ranking does not change. Boundedness ◦Is a technical assumption and means that growing streams cannot be worse/better than all constant streams. Alternative discounting functions hyperbolic discounting quasi-hyperbolic discounting issue is that any non-exponential discounting function violates time consistency inequality and discounting a consumption stream Transform consumption streams in calendar time to consumption streams in equivalent time. Duration of each generation is expanded/compressed up to the point where all consumption has the same moral value. Since each instant of consumption in equivalent had the same value, we can apply any standard anonymous inequality averse aggregation of consumption. ◦Examples: gini coefficient The Gini coefficient measures the inequality among the values of a frequency distribution, such as levels of income. two income distributions: (0,0,20,20,20) and (6,6,6,21,21) The gini coefficient fails regarding inequality because it would say that the two distributions have the same amount of inequality. But its intuitive to choose the second because no one has an income of 0. Inequality is not objective and efficiency is always more important discounting and inequality we dont know yet how the relationship really looks like there are no disethical choices and there is no optimal choice 5. lecture reading: The Ethics of Risk main points: risk vs. uncertainty ◦Risk is when we know exactly what the probability is -> very clear/narrow ◦Uncertainty is when we don't know exactly what the probability is -> interval of probabilities precautionary approach ◦minimalise the worst possible outcome (maxi-minimising) minimize risk oder harm? ◦risk attitudes of people are different utilitarianism ◦maximise the expected utility, but problem with risk subjective probabilities ◦its difficult to respect individual preferences of risk, because its an individual thing but we decide the risk for others veil of ignorance Risk and justice time is an essential aspect of risk -> there is a before the risk is resolved and an after the risk is resolved standard approach to assess risky income distributions individual rationality  ◦Individuals preferences admit an expected utility representation social rationality ◦Social preferences admit an expected utility representation pareto efficiency ◦If individuals are better off, social welfare is larger result: ◦social welfare is: ‣ the sum of individuals expected utilities or the expectation of the social welfare in each state (the sum of the utilities of individuals in that state) ◦pros: ‣ simple, intuitive, powerful ◦cons: ‣ inequality aversion is given by indivuals risk aversion ‣ indifference to the distribution of utilities across states and individuals ‣ no role for the timing of resolution of risk Risk and time Equality with risk and time? Earlier generations are different than later ones. An allocation of consumption is equitable if at any point in time, the consumption is socially as desirable as the risky consumption of a lter generation. main result Discounting is endogenous: ◦higher risk of extinction -> more discounting ◦more future risk -> less discounting 6. lecture reading: Population Axiology main points: repugnant conclusion sadistic mere addition principle Population ethics Knowing that policy influences population, how to do so? ◦In economics they say: give me your social welfare functions and I will compute the optimal policy. Quality vs. Quantity ◦Population problem consists of identiyfying the tradeoff between quality and quantity of people. total utilitarianism repugnant conclusion: ◦For any world with people enjoying very high utility, there exists a much larger world with people having lifes that are barely woth living that is socially better. every person who is added is positive for the total A parent who is indifferent between 1 child and 2 children should rather get 2. ◦Social welfare is larger when forcing parents to have more children. ◦If the additional child as its own dynasty, the well-being loss of parents is irrelevant. average utilitarianism sadistic conclusion: ◦It may be better to add few people with life not worth living, rather than adding (many) people with lives worth living. only adding a person if it is positive for the total avarage A parent who is indifferent between 1 child and 2 children should rather get 2 if their utility is larger than average utility. ◦Social welfare is larger when forcing parents to have fewer or more children, depending on their utility. ◦If the additional child has its own dynasty, the well-being loss of parents is irrelevant. 9. + 11. lecture The theory of International Environmental Agreements (IEA) Research questions There is no central organisation that has power over all countries and with that there is no mechanism by which we can punish countries. There are two types of agreements: ◦very strict (precise about the amount): less countries who would join but higher degree of commitment ◦soft: tend to include more countries IEA‘s are a natural way to address the problem of climate change ◦a healthy environment is a global public good ◦participation to such agreements is itself a public good ◦binding agreements help overcome the free-riding problem Theoretical framework non-cooperative game theory of coalition formation two stages: ◦coalition game: deciding non cooperative wheter or not to sign the agreement ‣ join the agreement, sit together and talk about what to do ◦emission game: playing the non cooperative nash emission game, where the countries which sign the agreement play as single player and divide the resulting payoff according to a given burden-sharing rule. ‣ key assumption: each country‘s payoff increases with the coalition size ‣ talking about how much to cut emissions coalition game: ◦all countries are identical ◦There is only one coalition when they sign the agreement, and they can‘t propose a different one. All other countries play as a singleton. ◦A coalition is profitable if each country gains from joining the coaliton. ◦A coalition is stable if no country gains from leaving the coalition and no other country wants to join the coalition. ◦A profitable and stable coalition is pareto optimal, if there exists no other profitable and stable coalition that makes everyone better off. partial cooperation ◦It‘s not a prisoners dilemma but a chicken game. The equilibrium is not there where no ohne signs the agreement. ◦The equilibrium is one where a profitable and stable, but partial, coalition emerges out of the two stage-game. ◦Two groups of countries: signatories and defectors  small coalitions ◦Mostly there are small numbers of signatories and there are the main directories to extend it: ‣ Transfers: proposed to tackle the profitability dimension (pay other countries to join) important tool to expand an originally stable, but small, environmental coalition ‣ Issue linkages: linkage of environmental negotiations to other economic issues (example: technology, education) helps to offset the free-riding incentives of countries by bundeling the benefit its better selling it to countries ‣ Threats: used to punish non-signatories but credible threats are difficult to design