Simple sense about discount rates

Geoffrey Heal writes:

Sterner and Persson…talk about the effect of changes in relative prices rather than consumption of produced and environmental goods, but the point is the same.  If we consume both produced goods and the services of the environment…then we can expect that with climate change environmental services will become scarce relative to produced goods and therefore their price will rise relative to that of produced goods.  Consequently, the present value of an increment of environmental services may be rising over time, and the consumption discount rate on environmental services may thus be negative…This could be the case even with a positive pure rate of time preference…

Here is the paper.  Here is an ungated version.  In the interests of fairness to both sides of this debate, I should note that while I believe the costs of climate change are higher than most people think, I also believe that the costs of fixing the problem are higher than people think.


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