Abstract
Taking climate change as an example, this paper provides new insights on the optimal provision of a long-term public good within and across generations. We write the Bowen–Lindhal–Samuelson (BLS) conditions for the optimal provision of the public good in a world divided into N countries, with two periods, present and future, and we simultaneously determine the optimal response in the first and second periods for a given rate of pure time preference. However, the Negishi weights at second period cannot be determined unambiguously, even under a “no redistribution constraint” within each generation, because they depend on non-observable future incomes; and thus on the answers to two often-overlooked ethical questions: (i) Do rich countries agree on deals which recognize that developing countries may catch up with developed countries in the long run, or do they use their negotiating powers to preserve the current balance of power? And (ii) does each country consider only the welfare of its own future citizens (dynastic solidarity) or does it extend its concern to all future human beings (universal solidarity)? Answers to (i) and (ii)—critical in the debate about how to correct the market failures causing global warming—define four sets of Negishi weights and intertemporal welfare functions, which we interpret as four mandates that countries could give to the Chair of an international negotiation on climate change to find an optimal solution. We find that in all mandates, public good provision expenditures are decreasing functions of income at first period. But each mandate leads to a different allocation of expenditures at second period and to different optimal levels of public good provision at both first and second periods. Finally, we show that only one of these four mandates defines a space for viable compromises.
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The authors are grateful to François Bourguignon, Graciela Chichilnisky, Sylviane Gastaldo, Roger Guesnerie, Cédric Philibert, Gilles Rotillon, Zmarak Shalizi, Tarik Tazdait, David Wheeler and anonymous referees for very constructive comments on earlier versions of this manuscript. The authors would also like to thank the participants of workshops and seminars in Kyoto, Bilbao, La Réunion, Washington DC, and Paris for helpful discussions.
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Lecocq, F., Hourcade, JC. Unspoken ethical issues in the climate affair: Insights from a theoretical analysis of negotiation mandates. Econ Theory 49, 445–471 (2012). https://doi.org/10.1007/s00199-010-0589-z
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DOI: https://doi.org/10.1007/s00199-010-0589-z