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

Nikolai Hoberg () and Stefan Baumgärtner
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Nikolai Hoberg: Sustainability Economics Group, Leuphana University of Lüneburg, Germany

No 198, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: 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.

Keywords: climate change; closed ignorance; intergenerational equity-efficiency tradeoff; irreversibility; Pareto-efficiency; sustainability; unawareness (search for similar items in EconPapers)
JEL-codes: D3 H23 Q01 Q38 Q56 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-02
New Economics Papers: this item is included in nep-ene and nep-env
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