Irreversibility, ignorance, and the intergenerational equity-efficiency trade-off

Activity: Talk or presentationConference PresentationsResearch

Nikolai Hoberg - Speaker

Stefan Baumgärtner - Speaker

    Two important policy goals in intergenerational problems are Pareto-efficiency
    and sustainability, i.e. intergenerational equity. We demonstrate that the pursuit of these goals is subject to an intergenerational equity-efficiency trade-off. Our analysis highlights two salient characteristics of sustainability problems and policy: (i) temporal irreversibility, i.e. the inability to revise one’s past actions; and (ii) unawareness of future consequences of present actions in human-environment systems (“unknown unknowns”). If initially unknown sustainability problems become apparent and policy is enacted after irreversible actions were taken, policy-making faces a fundamental trade-off between Pareto-efficiency and sustainability.


    28th Annual Congress of the European Economic Association and 67th European Meeting of the Econometric Society - EEA 2013


    Gothenburg, Sweden

    Event: Conference