How the Invisible Hand is Supposed to Adjust the Natural Thermostat: A Guide for the Perplexed

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Abstract

Mainstream climate economics takes global warming seriously, but perplexingly concludes that the optimal economic policy is to almost do nothing about it. This conclusion can be traced to just a few “normative” assumptions, over which there exists fundamental disagreement amongst economists. This paper explores two axes of this disagreement. The first axis (“market vs. regulation”) measures faith in the invisible hand to adjust the natural thermostat. The second axis expresses differences in views on the efficiency and equity implications of climate action. The two axes combined lead to a classification of conflicting approaches in climate economics. The variety of approaches does not imply a post-modern “anything goes”, as the contradictions between climate and capitalism cannot be wished away.
Original languageEnglish
JournalScience and Engineering Ethics
DOIs
Publication statusPublished - 2016

Keywords

  • Climate change economics
  • Carbon pricing
  • Social discount rate
  • Equity versus efficiency
  • Normative uncertainty

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