Climate change and future generations

Southern California Law Review

Volumn 84, Issue 5, 2011, Pages 1097-1163

  Revesz, Richard L ^a   Shahabian, Matthew R ^a  

^a NEW YORK UNIVERSITY   (United States)

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EID: 80054740193     PISSN: 00383910     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (148)

1. Massachusetts v. EPA, 549 U.S. 497 (2007).
2. EPA, Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. 66,496 (Dec. 15, 2009) (to be codified at 40 C.F.R. ch. 1).
3. EPA & NHTSA, Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25,324 (May 7, 2010) (to be codified in scattered parts of 40 C.F.R. and 49 C.F.R.).
4. See American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. (2009).
5. See, e.g., Ian Talley, Comprehensive 2010 Climate Bill Highly Unlikely, Murkowski Says, WALL ST. J. (Mar. 11, 2010, 2:10 PM), http://online.wsj.com/ article/SB10001424052748703625304575115803550688146.html.
6. See Final Rule, 75 Fed. Reg. at 25,539;
7. Exec. Order No. 12,866, 3 C.F.R. § 638 (1994);
8. Exec. Order No. 13,563, 76 Fed. Reg. 3821 (Jan. 21, 2011) (supplementing but not replacing Exec. Order No. 12,866).
9. See EPA & NHTSA, Proposed Rulemaking To Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 74 Fed. Reg. 49,454, 49,477 (Sept. 28, 2009). In the final rule, the social cost of carbon estimates ranged from $5 to $65.
10. See also Final Rule, 75 Fed. Reg. at 25,520-22. The difference in the estimates from $5 to $35 entirely reflects differences in the discount rate, and the $65 rate reflects higher estimates of damage caused by GHGs.
11. Inst. for Policy Integrity, N.Y.U. School of Law, Comments Regarding Proposed Rulemaking to Establish LightDuty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards 2 (Nov. 27, 2009).
12. Martin L. Weitzman, A Review of The Stern Review on the Economics of Climate Change, 45 J. ECON. LITERATURE 703, 705 (2007) [hereinafter Weitzman, Stern Review].
13. See, e.g., Sir Nicholas Stern, The Economics of Climate Change, 98 AM. ECON. REV. 1, 12 (2008) [hereinafter Stern, Economics] (describing "pervasive confusion about the basic theory of discounting");
14. Value Judgments, Welfare Weights and Discounting: Issues and Evidence, in AFTER THE STERN REVIEW: REFLECTIONS AND RESPONSES 10 (2007) (addressing confusion between pure time preference discounting justification and the discount rate);
15. WILLIAM NORDHAUS, A QUESTION OF BALANCE: WEIGHING THE OPTIONS ON GLOBAL WARMING POLICIES 169-70 (2008) [hereinafter NORDHAUS, BALANCE] (same);
16. David Weisbach & Cass R. Sunstein, Climate Change and Discounting the Future: A Guide for the Perplexed, 27 YALE L. & POL'Y REV. 433, 434 (2009) ("The resulting debates about the proper method of discounting have been heated, with Stern finally accusing Nordhaus and others of plain ignorance.");
17. Kenneth J. Arrow et al., Intertemporal Equity, Discounting, and Economic Efficiency, in CLIMATE CHANGE 1995: ECONOMIC AND SOCIAL DIMENSIONS OF CLIMATE CHANGE 130 (James P. Bruce, Hoesung Lee & Erik F. Haites eds., 1996) [hereinafter Arrow et al., IPCC Report] ("The debate is often confusing.").
18. Compare Dexter Samida & David A. Weisbach, Paretian Intergenerational Discounting, 74 U. CHI. L. REV. 145, 147 (2007) (explicitly addressing only opportunity cost discounting while setting aside other justifications),
19. Douglas A. Kysar, Discounting ⋯ on Stilts, 74 U. CHI. L. REV. 119 (2007) (accusing Samida and Weisbach of "smuggl[ing] back into their argument the pure rate of time preference argument that they attempted to disclaim at the outset of their piece").
20. Indeed, scholars have admitted to being "baffled" by discounting justifications different from the one they address, highlighting the need for a comprehensive evaluation of the different justifications. Richard N. Cooper, International Approaches to Global Climate Change, 15 WORLD BANK RES. OBSERVER 145, 152-53 (2000) (addressing only opportunity cost discounting).
21. See also Louis Kaplow, Elisabeth Moyer & David A. Weisbach, The Social Evaluation of Intergenerational Policies and Its Application to Integrated Assessment Models of Climate Change, 10 B.E.J. ECON. ANALYSIS & POL'Y no. 2, 2010 at 1, 1, 19 (describing discussion as "confusing and sometimes misleading");
22. David F. Burgess & Richard O. Zerbe, Appropriate Discounting for Benefit-Cost Analysis, 2 J. BENEFIT-COST ANALYSIS no. 2, 2011 at 1, 1 ("[P]roponents of different approaches to discounting are frequently unclear about what they are maximizing, or what function the discount rate is supposed to perform.").
23. SIR NICHOLAS STERN, THE STERN REVIEW: REPORT ON THE ECONOMICS OF CLIMATE CHANGE (2006) [hereinafter STERN REVIEW].
24. Leslie Shiell, Descriptive, Prescriptive and Second-best Approaches to the Control of Global Greenhouse Gas Emissions, 87 J. PUB. ECON. 1431, 1439 (2003) ("The actual value of " which is used as the basis for policy is a purely ethical choice, which must be made by policy makers. Economic analysis gives no guidance as to the correct value.").
25. See also U.S. ENVTL. PROT. AGENCY, GUIDELINES FOR PREPARING ECONOMIC ANALYSES 6-14 (2010) [hereinafter EPA GUIDELINES] ("[E]conomics alone cannot provide definitive guidance for selecting the =correct' social welfare function or the social rate of time preference.").
26. Citing Frank P. Ramsey, A Mathematical Theory of Saving, 38 ECON. J. 543, 543-59 (1928)
27. But see Wilfred Beckerman & Cameron Hepburn, Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change, 8 WORLD ECON. 187, 197 & n.21 (2007) (citing FRANK P. RAMSEY, Truth and Probability, in THE FOUNDATIONS OF MATHEMATICS AND OTHER LOGICAL ESSAYS 156, 291 (1931)) ("[E]ven Ramsey accepted a positive pure rate of time preference when his guard was down.").
28. JOHN BROOME, COUNTING THE COST OF GLOBAL WARMING 95-96, 108 (1992).
29. William Cline has held this position for many years. Compare WILLIAM R. CLINE, THE ECONOMICS OF GLOBAL WARMING 8 n.3 (1992) [hereinafter CLINE, ECONOMICS] ("There is no allowance [in the rate of time preference] for pure myopia ⋯ an effect that is particularly inappropriate over an intergenerational horizon.")
30. William R. Cline, Meeting the Challenge of Global Warming, in HOW TO SPEND $50 BILLION TO MAKE THE WORLD A BETTER PLACE 1, 5 (2006) ("In [the prescriptive approach], the discount rate for =pure time preference' ⋯ is set at zero.").
31. See Tyler Cowen, Caring About the Distant Future: Why It Matters and What It Means, 74 U. CHI. L. REV. 5, 8-10 (2007).
32. See also Richard L. Revesz, Environmental Regulation, Cost-Benefit Analysis, and the Discounting of Human Lives, 99 COLUM. L. REV. 941, 1002 (1999) (agreeing with distinction between intrapersonal and intergenerational pure time preference).
33. See Partha Dasgupta, Discounting Climate Change, 37 J. RISK & UNCERTAINTY 141, 157 (2008) (conceding ethical argument is "hard to rebut").
34. ROY F. HARROD, TOWARD A DYNAMIC ECONOMICS: SOME RECENT DEVELOPMENTS OF ECONOMIC THEORY AND THEIR APPLICATION TO POLICY 40 (1966) ("[P]ure time preference [is] a polite expression for rapacity and the conquest of reason by passion.").
35. Geoffrey Heal, The Economics of Climate Change: A Post-Stern Perspective, 96 CLIMATIC CHANGE 275, 281 (2009) [hereinafter Heal, Post-Stern] ("I personally find it difficult to see any reason for valuing future people differently from present people just because of their futurity.");
36. Geoffrey Heal, Discounting: A Review of the Basic Economics, 74 U. CHI. L. REV. 59, 72 (2002) [hereinafter Heal, Basic Economics] ("The positions of Ramsey, Harrod, von Weizsäcker, and indeed of most economic theorists and philosophers who have written on this, is that the utility discount rate should be zero. Such a position is an ethical rather than an economic judgment, and there is no obvious ethical reason why future people should be considered less valuable than present people.").
37. Tjalling C. Koopmans, On the Concept of Optimal Economic Growth, 28 PONTIFICAE ACADEMIAE SCIENTIARUM SCRIPTA VARIA 225, 239 (1967) [hereinafter Koopmans, Concept] (expressing an "ethical preference for neutrality as between the welfare of different generations"). Koopmans, however, generally favors discounting, based on the apparent mathematical paradoxes from refusing to discount he outlined in a series of articles.
38. See, e.g., Kenneth J. Arrow, Discounting, Morality, and Gaming, in DISCOUNTING AND INTERGENERATIONAL EQUITY 13, 13-15 (Paul R. Portney & John P. Weyant eds., 1999) [hereinafter Arrow, Gaming] (citing Koopmans, Concept, supra; Tjalling C. Koopmans, Stationary Ordinal Utility and Impatience, 28 ECONOMETRICA 287 (1960)) (describing Koopmans as giving a "crushing answer" to reject zero time preference based on mathematical paradox of infinite generations).
39. Tyler Cowen & Derek Parfit, Against the Social Discount Rate, in JUSTICE BETWEEN AGE GROUPS AND GENERATIONS 144, 154-55 (Peter Laslett & James S. Fishkin eds., 1992) (describing pure time preference as "irrational" and unable to justify intergenerational discount rate).
40. Cédric Philibert of the International Energy Agency wrote, "If a ⋯ =prescriptive' position [is] adopted for ethical reasons, it is of course logical to give the pure time preference a nil value."Cédric Philibert, The Economics of Climate Change and the Theory of Discounting, 27 ENERGY POL'Y 913, 917 (1999) (citing CLINE, ECONOMICS, supra note 31).
41. ARTHUR C. PIGOU, THE ECONOMICS OF WELFARE 25 (4th ed. 1932) (suggesting pure time preference "implies ⋯ our telescopic faculty is defective").
42. John Quiggin, Stern and His Critics on Discounting and Climate Change: An Editorial Essay, 89 CLIMATIC CHANGE 195, 200 (2008) (arguing positive rate of pure time preference is ethically indefensible as it represents "selfishness" that harms future generations, and should not be used for developing social policy).
43. JOHN RAWLS, A THEORY OF JUSTICE 259 (1st ed. 1999) ("There is no reason for the parties to give any weight to mere position in time.").
44. HENRY SIDGWICK, THE METHOD OF ETHICS 412 (4th ed. 1890) ("[T]he time at which a man exists cannot affect the value of his happiness from a universal point of view; and that the interests of posterity must concern a Utilitarian as much as those of his contemporaries, except in so far as the effect of his actions on posterity-and even the existence of human beings to be affected-must necessarily be more uncertain.").
45. Robert M. Solow, The Economics of Resources or the Resources of Economics, 64 AM. ECON. REV. 1, 9 (1974) ("In solemn conclave assembled, so to speak, we ought to act as if the social rate of time preference were zero.").
46. See Louis Kaplow, Discounting Dollars, Discounting Lives: Intergenerational Distributive Justice and Efficiency, 74 U. CHI. L. REV. 79, 97 (2007) ("[A]lthough this Article is not primarily concerned with political considerations, it is worth some reflection on the plausibility of distribution neutrality. A conjecture is that, if one had to predict a priori the most likely long-run distributive impact of a policy change, distribution neutrality would be the best guess.").
47. Eric A. Posner, Agencies Should Ignore Distant-Future Generations, 74 U. CHI. L. REV. 139, 139-41 (2007) (accepting " could equal zero as an ethical and moral judgment, though not a political judgment);
48. Matthew W. Wolfe, Note, The Shadow of Future Generations, 57 DUKE L.J. 1897, 1906-07 (2008) (arguing person's interest in direct descendants does not explain "why people should care about future generations").
49. See also Cass R. Sunstein & Arden Rowell, On Discounting Regulatory Benefits: Risk, Money, and Intergenerational Equity, 74 U. CHI. L. REV. 171, 177-78 (2007) ("[The descriptive approach] is the standard approach of those who advocate discounting.").
50. See Shane Frederick, Valuing Future Life and Future Lives: A Framework for Understanding Discounting, 27 J. ECON. PSYCH. 667, 675 (describing how researchers "rarely attempt to isolate or assess the relative effects of ⋯ different considerations" when determining implicit discount rates). See also NORDHAUS, BALANCE, supra note 10, at 50 (explaining how he lowered " in his descriptive approach but raised " in order to maintain a d that approximated market data).
51. See Frank Ackerman & Ian J. Finlayson, The Economics of Inaction on Climate Change: A Sensitivity Analysis, 6 CLIMATE POL'Y 509, 512-13 (2006) ("The descriptive approach, in contrast, bases the discount rate on market interest rates because those rates represent consumers' revealed preference for future versus present rewards.").
52. W. Kip Viscusi, Rational Discounting for Regulatory Analysis, 74 U. CHI. L. REV. 209, 209 (2007) ("[D]istant benefits and costs should be recognized fully in the policy analysis process, but ⋯ should be weighted based on the same discount rate methodology that is applied to effects on the current generation.");
53. David Pearce et al., Valuing the Future: Recent Advances in Social Discounting, 4 WORLD ECON. 121, 126 (2003).
54. See also John Broome, The Ethics of Climate Change: Pay Now or Pay More Later", SCI. AM. MAG., May 19, 2008 (arguing it is doubtful markets "reveal people's ethical judgments about the value of future well-being");
55. See Shane Frederick, George Loewenstein & Ted O'Donoghue, Time Discounting and Time Preference: A Critical Review, 40 J. ECON. LITERATURE 351, 361 & n.14 (2002) (citing George Ainslie & Richard J. Herrnstein, Preference Reversal and Delayed Reinforcement, 9 ANIMAL LEARNING BEHAV. 476 (1981)) (observing hyperbolic discounting in pigeons);
56. Partha Dasgupta & Eric Maskin, Uncertainty and Hyperbolic Discounting, 95 AM. ECON. REV. 1290, 1298 (2005) (seeking to explain hyperbolic discounting observed in pigeons and starlings).
57. Uri Benzion, Amnon Rapoport & Joseph Yagil, Discount Rates Inferred from Decisions: An Experimental Study, 35 MGMT. SCI. 270, 282 (1989);
58. Gretchen B. Chapman, Temporal Discounting and Utility for Health and Money, 22 J. EXPERIMENTAL PSYCH.: LEARNING, MEMORY, AND COGNITION 771, 771 (1996);
59. Gretchen B. Chapman & Arthur S. Elstein, Valuing the Future: Temporal Discounting of Health and Money, 15 MED. DECISION MAKING 373, 374-75 (1995);
60. John L. Pender, Discount Rates and Credit Markets: Theory and Evidence from Rural India, 50 J. DEVEL. ECON 257 (1996);
61. Donald A. Redelmeier & Daniel N. Heller, Time Preference in Medical Decision Making and Cost-Effectiveness Analysis, 13 MED. DECISION MAKING 212, 214 (1993)).
62. Kris N. Kirby & R. J. Herrnstein, Preference Reversals Due to Myopic Discounting of Delayed Reward, 6 PYSCH. SCI. 83, 83 (1995);
63. Andrew Millar & Douglas Navarick, Self-Control and Choice in Humans: Effects of Video Game Playing as a Positive Reinforcer, 15 LEARNING & MOTIVATION 203, 213-16 (1984);
64. Jay Solnick et al., An Experimental Analysis of Impulsivity and Impulse Control in Humans, 11 LEARNING & MOTIVATION 61, 74-76 (1980);
65. Leonard Green et al., Preference Reversal and Self Control: Choice as a Function of Reward Amount and Delay, 1 BEHAV. ANALYSIS LETTERS 43, 43 (1981)).
66. W. Kip Viscusi, Joel Huber & Jason Bell, Estimating Discount Rates for Environmental Quality from Utility-Based Choice Experiments, 37 J. RISK & UNCERTAINTY 199, 212-13 (2008);
67. Kris N. Kirby & Nino Marakovic, Modeling Myopic Decisions: Evidence for Hyperbolic Delay-Discounting within Subjects and Amounts, 64 ORG. BEHAV. HUM. DECISION PROC. 22, 28-29 (1995);
68. Joel Myerson & Leonard Green, Discounting of Delayed Rewards: Models of Individual Choice, 64 J. EXPERIMENTAL ANALYSIS BEHAV. 263, 272 (1995);
69. Howard Rachlin, Andres Raineri & David Cross, Subjective Probability and Delay, 6 J. EXPERIMENTAL ANALYSIS BEHAV. 233, 243-44 (1991)).
70. Martin L. Weitzman, Why the Far-Distant Future Should Be Discounted at the Lowest Possible Rate, 36 J. ENVTL. ECON. & MGMT. 201, 206 (1998) [hereinafter Weitzman, Far-Distant Future].
71. Martin L. Weitzman, Gamma Discounting, 91 AM. ECON. REV. 260, 260 (2001) [hereinafter Weitzman, Gamma Discounting];
72. EPA & NHTSA, Proposed Rulemaking To Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 74 Fed. Reg. 49,594, 49,613-16 (Sept. 28, 2009) (using Newell-Pizer "random walk" uncertainty model for declining discount rate).
73. But see EPA & NHTSA, Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule, 75 Fed. Reg. 25,324, 25,522-23 (May 7, 2010) (not using declining discount rate in final rule).
74. Martin L. Weitzman, On Modeling and Interpreting the Economics of Catastrophic Climate Change, 91 REV. ECON. & STAT. 1 (2009)).
75. See, e.g., Elisabeth Rosenthal, Skeptics Find Fault With U.N. Climate Panel, N.Y. TIMES, Feb. 8, 2010, at A1 (accusing IPCC of exaggerating rate of climate change).
76. See also T.M. Scanlon, Rawls on Justification, in THE CAMBRIDGE COMPANION TO RAWLS 139, 139-53 (Samuel Freeman ed., 2003) (discussing alternative interpretations of Rawls' method of reflective equilibrium, describing as "intuitive" and "inductive" method).
77. See, e.g., David Anthoff, Cameron J. Hepburn & Richard S.J. Tol, Equity Weighting and the Marginal Damage Costs of Climate Change, 68 ECOLOGICAL ECON. 836, 836, 839 (2009) (using "global decisionmaker" in social welfare function).
78. See, e.g., Kenneth J. Arrow, Discounting Climate Change: Planning for an Uncertain Future, Lecture given at Institut d'Économie Industrielle, Université des Sciences Sociales, Toulouse, 7-8 (Apr. 24, 1995) [hereinafter Arrow, Lecture], available at http://idei.fr/doc/conf/annual/paper- 1995.pdf ("I conclude therefore that our ethical and empirical conclusions strongly lead to the existence of a pure time preference which is greater than zero, perhaps about 1%.").
79. See David Weisbach & Cass Sunstein, Climate Change and the Rights of Future Generations, at 15 (Presentation to Reg-Markets Ctr.) (Oct. 3, 2008) (separating "ethical" arguments about "how much we need to leave to the future" from "positive" argument discussing, "given how much we have chosen to leave to the future, which projects should we choose"). What opportunity costs we actually consider, for example whether we restrict ourselves to other climate change projects, other public goods, or the market rate opportunity cost of capital, depends on a wealth of issues that we explore more thoroughly in Part V.
80. Tjalling C. Koopmans, Objectives, Constraints, and Outcomes in Optimal Growth Models, 35 ECONOMETRICA 1, 12-13 (1967) [hereinafter Koopmans, Objectives] (describing population growth issue as hardest discounting issue conceptually and practically).
81. We may ascribe this to a theory of "just desert." See, e.g., Owen McLeod, Desert, in STANFORD ENCYCLOPEDIA OF PHILOSOPHY (Edward N. Zalta ed., 2008), http://plato.stanford.edu/entries/desert/. Rawls would remove morality from this equation and simply describe it as a person's "legitimate expectations" based on effort and contribution.
82. Partha Dasgupta, Commentary: The Stern Review's Economics of Climate Change, 199 NAT'L INST. ECON. REV. 4, 6 (2006) ("To accept [the Stern Review's numbers] would be to claim that the current generation in the model economy ought literally to starve itself so that future generations are able to enjoy ever increasing consumption levels.").
83. THE WORLD BANK, WORLD DATABANK (2010), http://databank.worldbank.org/ddp/ home.do?Step=12&id=4&CNO=2 (rates based on 2007 Gross National Income figures).
84. See, e.g., Bradford DeLong, Partha Dasgupta Makes a Mistake in His Critique of the Stern Review, GRASPING REALITY WITH BOTH HANDS (Nov. 30, 2006, 1:18 PM), http://delong. typepad.com/sdj/2006/11/partha-dasgaptu.html (describing a savings rate of 22.5% as "far from absurd").
85. See Weisbach & Sunstein, supra note 10, at 452 & n.43 (arguing Ramsey formula is nearly century old and has been "supplanted by vastly more sophisticated models," citing e.g., ROBERT J. BARRO & XAVIER SALA-I-MARTIN, ECONOMIC GROWTH 59-90 (1995)).
86. J.A. Mirrlees & N.H. Stern, Fairly Good Plans, 4 J. ECON. THEORY 268, 284-85 (1972).
87. Robert C. Lind, Intergenerational Equity, Discounting, and the Role of Cost-Benefit Analysis in Evaluating Global Climate Policy, 23 ENERGY POL'Y 379, 385 (1995)).
88. See also John E. Roemer, The Ethics of Distribution in a Warming Planet, 48 ENVTL. RES. ECON. 363 (2011) (claiming single, infinite generation is only way to justify descriptive time preference discounting).
89. See John Broome, Discounting the Future, 23 PHIL. & PUB. AFF. 128, 151 (1994).
90. See Wojciech Kopczuk & Joseph P. Lupton, To Leave or Not to Leave: The Distribution of Bequest Motives, 74 REV. ECON. STUDIES 207, 208 (2007) (citing Michael G. Palumbo, Uncertain Medical Expenses and Precautionary Saving Near the End of the Life Cycle, 66 REV. ECON. STUDIES 395 (1999);
91. Karen E. Dynan, Jonathan Skinner & Stephen P. Zeldes, The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer, 92 AM. ECON. REV. 274 (2002) [hereinafter Dynan, Skinner & Zeldes, Importance of Bequests];
92. Karen E. Dynan, Jonathan Skinner & Stephen P. Zeldes, Do the Rich Save More", 112 J. POL. ECON. 397 (2004)).
93. Michael D. Hurd, Mortality Risk and Bequests, 57 ECONOMETRICA 779 (1989) (challenging economic value of bequest motive as trivial);
94. Michael D. Hurd, Savings of the Elderly and Desired Bequests, 77 AM. ECON. REV. 298, 306-08 (1987) (finding elderly people with children spend their wealth faster than people without children);
95. Lee M. Lockwood, The Importance of Bequest Motives: Evidence from Long-term Care Insurance and the Pattern of Saving 2 (Jan. 6, 2010) (unpublished manuscript), available at http://www.chicagofed.org/digital-assets/others/ research/research-calendar-attachments/seminars-200/sem-lockwood011110.pdf (explaining debate between bequest and precautionary motives remains unresolved because of problems identifying specific motives for savings).
96. James Poterba, Estate and Gift Taxes and Incentives for Inter Vivos Giving in the US, 79 J. PUB. ECON. 237, 261 (2001);
97. Kathleen McGarry, Inter Vivos Transfers and Intended Bequests, 73 J. PUB. ECON. 321, 349 (1999);
98. Joseph G. Altonji, Fumio Hayashi & Laurence J. Kotlikoff, Parental Altruism and Inter Vivos Transfers: Theory and Evidence, 105 J. POL. ECON. 1121 (1997);
99. John Laitner & Thomas F. Juster, New Evidence on Altruism: A Study of TIAA-CREF Retirees, 86 AM. ECON. REV. 893 (1996);
100. Mark O. Wilhelm, Bequest Behavior and the Effect of Heirs' Earnings: Testing the Altruistic Model of Bequests, 86 AM. ECON. REV. 874, 874, 890 (1996));
101. See JACQUELINE L. ANGEL, INHERITANCE IN CONTEMPORARY AMERICA: THE SOCIAL DIMENSIONS OF GIVING ACROSS GENERATIONS 17 (2008) (noting the "desire and need to obtain a high-quality education ⋯ has replaced [bequests] ⋯ as the pathway by which Americans convey their wealth to their children.");
102. J. Bradford DeLong, Bequests: A History of Bequests in the United States, in DEATH AND DOLLARS 33 (Alicia H. Munnell & Annika Sunden eds., 2003) (suggesting there is a broad consensus that bequests have decreased in importance, and now account for approximately 40% of aggregate wealth accumulation);
103. Claudine Attias-Donfut, Jim Ogg & Francois-Charles Wolff, Financial Transfers, in HEALTH, AGEING AND RETIREMENT IN EUROPE: FIRST RESULTS FROM THE SURVEY OF HEALTH, AGEING, AND RETIREMENT IN EUROPE 179 (Axel Börsch-Supan ed., 2005) ("[R]esearch has begun to show that the bulk of private money transfers between the generations occurs inter vivos.").
104. See also Martin Kohli, Intergenerational Transfers and Inheritance: A Comparative View, 24 ANN. REV. GERONTOLOGY & GERIATRICS 266, 276 (2004) (suggesting that bequest transfers are four times more valuable than inter vivos financial gifts).
105. Precise estimates of the relative size of inter vivos transfers are limited-stemming largely from disagreement over what constitutes a gratuitous transfer, see, e.g., Kerry A. Ryan, Human Capital and Transfer Taxation, 62 OKLA. L. REV. 223, 242 (2010), and the difficulty of obtaining inter vivos data because so much is excluded from wealth transfer tax reporting.
106. For a discussion of the merits of looking at more than taxable inter vivos transfers, see Kathleen McGarry, Inter Vivos Transfers or Bequests? Estate Taxes and the Timing of Parental Giving, 14 TAX POL'Y & ECON. 93 (2000).
107. There are reasons to suspect underreporting bias depending on whether the inter vivos transfer is viewed from the perspective of the donor or recipient. Jeffrey R. Brown & Scott J. Weisbenner, Intergenerational Transfers and Savings Behavior, in PERSPECTIVES ON THE ECONOMICS OF AGING 189 (David A. Wise ed., 2004).
108. John Langbein, The Twentieth-Century Revolution in Family Wealth Transmission, 86 MICH. L. REV. 722 (1988).
109. The authors note that this amount is adjusted from their finding that 31% of wealth is transferred inter vivos, accounting for possible underreporting. William G. Gale & John Karl Scholz, Intergenerational Transfers and the Accumulation of Wealth, 8 J. ECON. PERSP. 145, 156 (1994).
110. See John Beshears et al., How Are Preferences Revealed?, 92 J. PUB. ECON. 1787, 1788-90 (2008) (using discounting as example of "red flag" studies).
111. See, e.g., Robert N. Stavins, The Cost of Carbon-Sequestration: A Revealed-Preference Approach, 89 AM. ECON. REV. 994, 994-95 (1999) (describing problems with using opportunity cost of alternative land uses as revealed preferences to determine cost of carbon sequestration).
112. See also Simon Dietz, Cameron Hepburn & Nicholas Stern, Economics, Ethics, and Climate Change 9 (Jan. 13, 2008) (unpublished manuscript), available at http://ssrn.com/abstract=1090572 (describing problems with using market data for "revealed ethics").
113. See also Jean Drèze & Nicholas Stern, Policy Reform, Shadow Prices, and Market Prices, 42 J. PUB. ECON. 1, 34-36 (1990) (conducting formal analysis of how market imperfections cause market rates to differ from social discount rates and how "shadow prices" can be used to convert market prices to social discount rates).
114. See, e.g., Maureen L. Cropper, Sema K. Aydede & Paul R. Portney, 80 AM. ECON. REV. 469, 469 (1992) (asking participants to choose between pollution mitigation investments).
115. Amartya K. Sen, Isolation, Assurance, and the Social Rate of Discount, 81 Q.J. ECON. 112 (1967).
116. Magnus Johannesson & Per-Olov Johansson, The Discounting of Lives Saved in Future Generations-Some Empirical Results, 5 HEALTH ECON. 329, 331 (1996);
117. Ola Svenson & Gunnar Karlsson, Decision-Making, Time Horizons, and Risk in the Very Long-Term Perspective, 9 RISK ANALYSIS 385, 398 (1989)).
118. See also RICHARD L. REVESZ & MICHAEL A. LIVERMORE, RETAKING RATIONALITY 127-29 (2008) (outlining criticism and defense of stated preference studies).
119. See Report of the NOAA Panel on Contingent Valuation, 58 Fed. Reg. 4601, 4610 (Jan. 15, 1993) (concluding stated preference studies "convey useful information").
120. See Joan Martinez-Alier, Giuseppe Munda & John O'Neill, Commensurability and Compensability in Ecological Economics, in VALUATION AND THE ENVIRONMENT: THEORY, METHOD AND PRACTICE 37, 37-40 (Martin O'Connor & Clive L. Spash eds., 1999) (describing history of commensurability theory in context of socialist economies that lack effective pricing mechanisms).
121. See also Kenneth J. Arrow, Discounting and Public Investment Criteria, in WATER RESEARCH: ECONOMIC ANALYSIS WATER MANAGEMENT, EVALUATION PROBLEMS, WATER REALLOCATION, POLITICAL AND ADMINISTRATIVE PROBLEMS HYDROLOGY AND ENGINEERING, RESEARCH PROGRAMS AND NEEDS 13, 17-19 (Allen V. Kneese & Stephen C. Smith eds., 1966) (discussing the hypothesis that consumption is a function of wealth and the interest rate);
122. KENNETH J. ARROW & MORDECAI KURZ, PUBLIC INVESTMENT, THE RATE OF RETURN, AND OPTIMAL FISCAL POLICY 117-18 (1970) (same);
123. David F. Bradford, Constraints on Government Investment Opportunities and the Choice of Discount Rate, 65 AM. ECON. REV. 887, 889 (1975) (explaining consumption patterns in relation to government investments);
124. Robert C. Lind, A Primer on the Major Issues Relating to the Discount Rate for Evaluating National Energy Options, in DISCOUNTING FOR TIME AND RISK IN ENERGY POLICY, supra, at 21, 23 (using concept of shadow price of private capital to account for opportunity cost of financing public investments).
125. Edith Brown Weiss, Intergenerational Equity: A Legal Framework for Global Environmental Change, in ENVIRONMENTAL CHANGE AND INTERNATIONAL LAW: NEW CHALLENGES AND DIMENSIONS 385 (Edith Brown Weiss ed., 1992). Though both scholars are often mentioned in the context of "sustainable development," their approach to what is encompassed in our obligations to future generations differs. Solow focuses on sustainable economic growth, while Brown Weiss focuses on intergenerational equity.
126. See Timothy Williams, City Claims Final Private Island in East River, N.Y. TIMES, Nov. 20, 2007, at B1. The land remained undeveloped and slowly became a natural sanctuary for herons, ibises, oyster catchers, and egrets
127. Joseph Berger, So, You Were Expecting a Pigeon? In City Bustle, Herons, Egrets and Ibises Find a Sanctuary, N.Y. TIMES, Dec. 4, 2003, at B1. Based on the development of this natural refuge, New York City agreed to purchase South Brother Island as a wilderness sanctuary in 2007 for a reported two million dollars.
128. Robert S. Pindyck, Irreversibilities and the Timing of Environmental Policy, 22 RES. & ENERGY ECON. 233, 234 (2000) [hereinafter Pindyck, Irreversibilities];
129. Geoffrey Heal & Bengt Kristrom, Uncertainty and Climate Change, 22 ENVTL. & RES. ECON. 3, 10-11 (2002);
130. Alistair Ulph & David Ulph, Global Warming, Irreversibility, and Learning, 107 ECON. J. 636, 649 (1997).
131. See, e.g., Eric Neumayer, A Missed Opportunity: The Stern Review On Climate Change Fails to Tackle the Issue of Non-Substitutable Loss of Natural Capital, 17 GLOBAL ENVTL. CHANGE 297, 299 (2007) (arguing discounting must account for "non-substitutable" loss of natural resources that affect consumption growth).
132. Charles D. Kolstad, Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions, 31 J. ENVTL. ECON. & MGMT. 1 (1996));
133. 2 Abatement, 26 ENERGY ECON. 603 (2004).
134. But see Joseph H. Guth, Resolving the Paradoxes of Discounting in Environmental Decisions, 18 TRANSNAT'L L. & CONTEMP. PROBS. 95, 108-12 (2009) (criticizing "endless growth" assumption in discounting models and arguing climate change will affect economy's growth path profoundly).
135. Carolyn Kelly, How Intragenerational Distributions of Wealth (Should) Affect Discussions of Intergenerational Distributions of Wealth Under Climate Change Mitigation Policy Proposals 4-7 (Mar. 11, 2009) (unpublished manuscript) (on file with authors).
136. Christian Azar, Weight Factors in Cost-Benefit Analysis of Climate Change, 13 ENVTL. & RES. ECON. 249 (1999);
137. David W. Pearce, The Social Cost of Carbon and Its Policy Implications, 19 OX. REV. ECON. POL'Y 362 (2003);
138. Thomas C. Schelling, Intergenerational Discounting, 23 ENERGY POL'Y 395, 398-400 (1995).
139. See, e.g., PAUL COLLIER, THE BOTTOM BILLION: WHY THE POOREST COUNTRIES ARE FAILING AND WHAT CAN BE DONE ABOUT IT (2007);
140. DAMBISA MOYO, DEAD AID: WHY AID IS NOT WORKING AND HOW THERE IS A BETTER WAY FOR AFRICA (2009) (arguing foreign aid breeds corruption).
141. See Stephen M. Gardiner, Ethics and Global Climate Change, 114 ETHICS 555, 579 (2004) (noting philosophers are "virtually unanimous" that developed countries should bear cost of climate change mitigation, based on various ethical justifications).
142. Robert Porter, The New Approach to Wilderness Conservation Through Benefit-Cost Analysis, 9 J. ENVTL. ECON. & MGMT. 59 (1982));
143. Lisa Heinzerling, Regulatory Costs of Mythic Proportions, 107 YALE L.J. 1981, 2051 (1998)).
144. But see Bengt Kristrom & Pere Riera, Is the Income Elasticity of Environmental Improvements Less Than One, 7 ENVTL. & RES. ECON. 45, 52 (1996) (conducting empirical survey of European willingness to pay that "gives no support to the =folklore' that the income elasticity for environmental goods is at least one").
145. See Terry Lynn Karl, The Perils of the Petro-State: Reflections on the Paradox of Plenty, 53 J. INT'L AFF. 31, 32 (1999).
146. See also Steven Mufson, Op-Ed, Oil Spills. Poverty. Corruption. Why Louisiana is America's Petro-State, WASH. POST, July 18, 2010, at B01 (arguing BP oil spill is just the latest in a series of environmental disasters to befall Louisiana, one of the nation's poorest states with the highest oil production).
147. See David Pearce, Conceptual Framework for Analysing the Distributive Impacts of Environmental Policies 33-35 & tbl.4 (Apr. 2003) (unpublished manuscript), available at http://www.ucl.ac.uk/~uctpa36/oecd%20distribution.pdf (surveying empirical literature and concluding most studies suggest elasticity between .3 and .7), means that though the wealthier we are the more money we would be willing to pay, our wealth increases faster than our willingness to pay.
148. David Pearce, What Constitutes a Good Agri-Environmental Policy Evaluation?, in EVALUATING AGRI-ENVIRONMENTAL POLICIES: DESIGN, PRACTICE AND RESULTS 71, 80 (2005).