> However, I believe if you calculate the net present value of some
> catastrophe that lies even 100 or 200 years in the future, using the
> usuual discounting method employed by business economists and
> government planners, you do end up with a net present value for the
> disaster that makes it virtually irrelevant to people living in
> present.
I think the only reasonable way to determine that value is by asking
people what deprivations they are willing to suffer today for the sake
of avoiding a catastrophe 200 years hence.
But, I also think that when there are real investment returns,
interest rates are useful.
Say I might want to do something for people 200 years hence, then I
could buy some stainless steel, bury it in my garden and leave it
there for 200 years to be used by my descendants then.
Or I could buy the steel, make a wind turbine from it, generate
electricity with it, make more steel with the electricity and then
after 200 years leave my descendants not 1 tonne of steel but 1000
tonnes of steel in the form of wind turbines.
Putting these two ways of approaching interest back into climate
change terms. I think it makes no sense to discount the value of
species loss or of a 10% probability of the end of humanity, but I
don't want to pay 100 Dollar today, so that descendants of mine in
2300 making a million Dollar a year, can spend 110 Dollar less in dike
maintenance; especially so, when assuming only slowly declining real
investment returns over the long term, I could invest those 100
Dollars and turn them into a million Dollars over those 300 years
paying for 10000 such dike improvements.
Nor do I want to spend 90% of my income today to prevent a catastrophe
in 2300, when much richer people in 2100 could do the same with 10% of
their income.
I accept Michael's point, which I think basically is (Michael may
chime in, if I get him wrong), that the sum total of what we do must
allow substantial real positive returns, otherwise people in 2300 will
be fewer in number and poorer than we are today living on a poisoned
planet, and indeed be helped more by burying something for them to use
then, than they would be by us misinvesting the oil or steel today.
>From a "how much deprivation today is the well being of people in 2300
worth to us" perspective, a 0% real investment return may be more than
enough to justify the expenditure (not buying a big car so that some
poor fellow in 2300 has enough to eat may seem like a good deal to
many people), or far too little (not buying anything to eat today, so
that poor fellows in 2300, 2400, 2500 ... 10450 have enough to eat may
not seem like a very good idea at all to rather many people).
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