Uncertain future preferences and conservation

Chichilnisky, Graciela and Beltratti, Andrea and Heal, Geoffrey (1998): Uncertain future preferences and conservation. Published in: Sustainability: Dynamics and Uncertainty (1998): pp. 257-276.

Abstract

An important problem in environmental economics arises from te irreversibility of consuming or destroying certain resources. Extractive resources like oil are a clear example. Even for environmental resources the same seems to be true in a number of environmental cases, for example biodiversity, current climate conditions, or complex ecological systems. Irreversibility imposes a sever externality across different generations; future generations will suffer from the destruction of a unique asset like Amazonia, and it is not clear how such a loss could be compensated in terms of other goods. If such an asset is destroyed, then it is not possible to subsequently restore it. In contrast, if the asset is preserved, then it is possible to "use" the asset at a subsequent date. If there is uncertainty about future preferences or valuations, then preservation provides a type of insurance which is not available if the irreversible decision is carried out.

• Item Type: MPRA Paper
• Language: English
• Keywords: biodiversity; climate change; ecological systems; externality; future; preferences; environmental; environment; irreversible; resources; natural resources
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation

References

Arrow, K. J. and A. C. Fisher. "Environmental Preservation, Uncertainty and Irreversibility", Quarterly Journal of Economics 88,1974,3 12-3 19.

Asheim, G. "Sustainability When Resource Management Has Stochastic Consequences", Discussion Paper, Norges Handelshayskole, 1193.

Beltratti, A,, G. Chicbilnisky and G. Heal. "Sustainable Growth and the Green Golden Rule", in Approaches to Sustainable Economic Development, I. Goldin and A. Winters (eds.), Paris, OECD, pp. 147-156.

Bishop, R. "Option Value: An Exposition and Extension", Land Economics 58, 1982, 1-15.

Bohm, P. "Option Demand and Consumers' Surplus: Comment", American Economic Review 65(4), 1975, 733-736.

Chichilnisky G. and 0. M. Heal. "Global Environmental Risks", Journal of Economic Perspectives 7, 1993, 65-46,

Cicchetti, C. J. and A. M. Freeman. ''Option Demand and Consumer Surplus: Further Comment", Quarterly Journal of Economics 85, 1971, 528-539.

Dasgupta, P. S. and G. M. Heal. "The Optimal Depletion of Exhaustible Resources*', Review, of Economic Studies, Special Issue on Symposium on the Economics of Exhaustible Resources, 1974,3-28.

Dasgupta, P. S. and G. M. Heal. Economic Theory and Exhaustible Resources, Cambridge, UK., Cambridge University Press, 1979.

Fisher, A. C. and W. M. Hanernann. "Quasi-Option Value: Some Misconceptions Dispelled", Journal of Envimnmental Economics and Managemerat 15,1987,183-190.

Fisher, A. C. and W. M. Hanemann. "Option Value and the Extinction of Species", in Advances in Applied Microeconomics, Vol. 4, V. K. Smith (ed.), Greenwich, CT, JAI Press, 1979.

Fisher, A. C., J. V. Krutilla and C. J. Cicchetti. "The Economics of Environmental Preservation: A Theoretical and Empirical Perspective", American Economic Review 57, 1972, 605-619.

Graham-Tomasi, T., "Quasi-Option Value", in Handbook of Embvnmental Economics, D. W. Bromley (ed.), Oxford (U.K.) and Cambridge (U.S.A.), Blackwell, 1995.

Hanemann, W. M. "Information and the Concept of Option Value", Journal of Environmental Economics and Management 16, 1989, 23-37.

Heal, G. M. "Uncertainty and the Optimal Supply Policy for an Exhaustible Resource", in Advances in the Economics of Energy and Resources, Vol. 2, R. Pindyck (ed.), Greenwich, CT, JAI Press, 1979, pp. 119-147.

Heal, G. M. "Depletion and Discounting", In Proceedings of Symposia in Applied Mathematics, Vol. 32, R. McKelvey (ed.), American Mathematical Society, 1985, pp. 33-43.

Henry, C. "Option Values in the Economics of Irreplaceable Assets", Review of Economic Studies, Special Issue on Symposium on the Economics of Exhaustible Resources, 1974, 89-104.

Henry, C. "Investment Decisions under Uncertainty: The Irreversibility Effect", American Economic Review 64, 1974, 1006-1012.

Krautkraemer, J. A. "Optimal Growth, Resource Amenities and the Preservation of Natural Environments", Review of Economic Studies LII, 1985,153-170.

Krutilla, J. V. "Conservation Reconsidered", American Economic Review 57, 1967, 777- 786.

Mitchell, R. C. and R. Carson, Using Surveys to Value Public Goods: the Contingent Valuation Method, Washington DC, Resources for the Future, 1989.

Rothschild, M. and J. E. Stiglitz. "Increasing Risk 1: A Definition", Journal of Economic Theory 2(3), 1970, 225-243.

Schmalensee, R. "Option Demand and Consumers' Surplus : Valuing Price Changes under Uncertainty", American Economic Review 62, 1972, 813-824.

Smith, V K. "A Bound for Option Value", Land Economics 60(3), 1984, 292-296 .

Solow, R. M. "Sustainability: An Economist's Perspective", The Eighteenth J. Seward Johnson Lecture, Woods Hole Oceanographic Institution, Woods Hole, MA, 1992 .

Weisbrod, B. A. "Collective Consumption Services of Individual Consumption Goods", Quarterly Journal of Economics 77, 1964, 71-77 .

Viscusi, W. K. "Environmental Policy Choice with an Uncertain Chance of Irreversibili- ty", Journal of Environmental Economics and Management 12, 1985, 28-44.

Viscusi, W K. "Irreversible Environmental Investments with Uncertain Benefit Levels", Journal of Environmental Economics and Management 15, 1988, 147-157 .

World Commission on Environment and Development. Our Common Future, (the "Brundtland Report"), Oxford University Press, 1987 .