Linkage of cap-and-trade systems is typically advocated by economists on a general analogy with the beneficial linking of free-trade areas and on the specific grounds that linkage will ensure cost effectiveness among the linked jurisdictions. An appropriate and widely accepted specification for...

A critical issue in climate-change economics is the specification of the so-called "damages function" and its interaction with the unknown uncertainty of catastrophic outcomes. This paper asks how much we might be misled by our economic assessment of climate change when we employ a conventional...

What is the best way to incorporate a risk premium into the discount rate schedule for a real investment project with uncertain payoffs? The standard CAPM formula suggests a beta-weighted average of the return on a safe investment and the mean return on an economy-wide representative risky...

Suppose that there is a probability density function for how bad things might get, but that the overall rate at which this probability density function slims down to approach zero in the tail is uncertain. The paper shows how a basic precautionary principle of tail fattening could then apply....

The long term discount rate is critically dependent upon projections of future growth rates that are fuzzier in proportion to the remoteness of the time horizon. This paper models such increasing fuzziness as an evolving hidden-state stochastic process. The underlying trend growth rate is an...

It is widely recognized that the economics of distant-future events, like climate change, is critically dependent upon the choice of a discount rate. Unfortunately, it is unclear how to discount distant-future events when the future discount rate itself is unknown. In previous work, an...

Thus far, most approaches to resolving the global warming externality have been quantity based. With n different national entities, a meaningful comprehensive treaty involves negotiating n different binding emissions quotas (whether tradeable or not). In post-Kyoto practice this n-dimensional...

Japan has a relatively unique system of labor compensation. Most Japanese workers are paid large bonuses twice a year. This paper examines the cyclical movement of bonuses compared with wages and the relation of bonuses to employment in the context of the Weitzman "share economy." The paper...

Using only information based on current directly-observable market behavior, the paper shows how to make rigorous dynamic welfare comparisons among economies or economic situations having arbitrarily-different endowments and technologies, but sharing a common dynamic preference ordering. The...

This paper posits the conceptually useful allegory of a futuristic "World Climate Assembly" that votes on global carbon emissions via the basic principle of majority rule. Two variants are considered. One is to vote on a universal price (or tax) that is internationally harmonized, but the...