Future Environmental Economics

According to the article, Impacts on Future Environmental Economics, in evaluating policy decisions, governments often leave out a very important group: the people of the future. Economic and environmental decisions often fail to take into account the well-being of future inhabitants of the planet. It goes on to say that the discount factor is used to determine the worth of something in the future, and a discount factor of 1 means it will become more valuable in the future, where as, a discount factor less than 1 means that the value will decrease in the future. Because so many goods have discount factors of less than 1, some people would argue that the current generation should not worry about future generations in this respect. The current generation would only be sacrificing its own well-being, and growth will cause future generations to have higher living standards anyways. In the end it says that environmentalists would argue that we must uphold our moral obligation to future generations. What do you think about this article? Do you agree with the environmentalists and do you really think people don’t care about future inhabitants of our planet?

1 comment:

Dr. Tufte said...

Minor correction - it is a discount factor larger than 1 that makes something in the future more valuable.

Generally speaking, most people are not very well inclined towards those that are econonomically better off (less politely, people richer than yourself).

The problem with doing things to help the environment is that they typically help people in the future more than they do those alive today.

If you combine those two previous paragraphs with the fact that the richest people you may ever know well are most likely to be your own children (think about it - most of your parents are richer than your grandparents, and so on) it becomes difficult to motivate environmental improvements.

The environmental movement understands this irony quite well. This is why they continually push the point that our descendents will not be richer unless we do something today. Pushing this is perfectly rational if their main goal is improving the environment.

Unfortunately, it is very unlikely to be true. Things may change, but it hasn't been true in what are now the developed economies in 10-15 generations.