Arnold Kling  

Hal Varian on the Stern Report

PRINT
Collegiate Writing... Major Economic Stories, Update...

He wrote,


According to [William] Nordhaus, the assumptions used in the Stern Review imply that per capita yearly consumption in 2200 will be $94,000 as compared with $7,000 today. So, is it really ethical to transfer wealth from someone making $7,000 a year to someone making $94,000 a year?

Although Varian made a valiant effort to explain the nature of the controversy over the discount rate used in the Stern Report, my sense is that he did not succeed. It is quite a messy issue. I don't think that my attempt succeeds, either. My guess is that it takes a pretty strong technical background in economics to appreciate either Varian's column or my earlier blog post.

However, Varian and I both are saying that the Stern report took an extreme position on social discounting. Moreover, this position has implications that go far beyond global warming policy.


Comments and Sharing





COMMENTS (1 to date)
Barkley Rosser writes:

I actually finally took a closer look at Nordhaus's projections and discovered that he did what I have been recommending all over the place: he used green golden rule hyperbolic discounting, in his case starting with a 3% for the near term with the rate declining to 1% for periods after 200 years. Not too bad I would say. Gives his account a lot of credibility.

Comments for this entry have been closed
Return to top