Suchergebnisse

As a quintessential long-term policy problem, climate change poses two major challenges. The first is to develop, under considerable uncertainty, a plan for allocating resources over time to achieve an effective policy response. The second is to implement this plan, once arrived at, consistently over time. We consider the second of these two challenges, arguing that it consists of three interrelated, commitment problems—the time inconsistency problem, the domestic politics problem, and the anarchy problem. We discuss each of these commitment problems in some detail, explore how they relate to climate policy, and suggest institutional designs that may help limit their adverse impact. While each of these commitment problems is difficult to tackle on its own, climate change requires us to cope with all of them at once. This is likely one major reason why we have so far made only modest headway on this vital issue.

"When consumers exhibit present bias and are time-inconsistent, the standard solution to market failures caused by externalities-Pigouvian pricing-is suboptimal. I investigate policies aimed at externalities for time-inconsistent consumers. Welfare-maximizing policy in this case includes an instrument to correct the externality and an instrument to correct the present bias. Either instrument can be an incentive-based policy or a command-and-control policy. Calibrated to the US automobile market, simulation results from a model with time-inconsistent consumers suggest that the second-best gasoline tax is 18%-30% higher than marginal external damages. These simulations also suggest that social welfare is maximized with a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non-hybrid car by about $750-$2200 relative to the price of an average hybrid car"--National Bureau of Economic Research web site

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within particular household under study. (JEL E24, F13, F16)