PKT message, Re: post keynesian economics and environmetal sustainablity

Uncertainty is emphasized by many in environmental policy, and the connections to PK emphasis on same is clear, and has been pointed out by some. Some of the best work on uncertainty in environmental policy is by Funtowicz and Ravetz, and they (or maybe Ravetz by himself) had an article in the JPKE on “Economics as a Folk Science”. The literature on the “precautionary principle” in environmental policy is mostly due to uncertainty. We don’t KNOW that global climate change or ozone depletion or whatever will happen to such and such a degree by a certain date and that if so it will have such and such effects, but we don’t KNOW that it won’t either. So the precautionary principle says we should be cautious in the face of uncertainty—better to err on the side of caution when it comes to life, health, environment. Stephen Marglin has an essay some years back where he talked about uncertainty in environmental and uncertainty in Keynes, and he said that in Keynes, investors are uncertain but we need action in the face of uncertainty (animal spirits), ‘otherwise there would not be much investment’ just based on cold calculation. But in the case of environmental uncertainties we don’t want action in the face of uncertainty, but caution. mat

-----Original Message-----
From: RHolt1234@xxxxxxx [mailto:RHolt1234@xxxxxxx]
Sent: Monday, January 21, 2002 5:01 PM
To: pkt@xxxxxxxxxxxxxxxx
Subject: post keynesian economics and environmetal sustainablity

Hopefully in the near future Bill Mitchell, Mat Forstater and I will start on a project of editing a volume on Post Keynesian economics and the environment. Thinking a little bit about the project let me throw out a basic issue to see how some of you will respond. A primary issue in environmental economics has to do with long-run sustainability. Using a very simple model of comparing marginal abatement costs with marginal damages to determine a socially efficient level of emissions of a pollutant assumes that all costs are estimated. A criticism given is that such a model has a tendencyto put more weight on costs and benefits for present generations compared to future generations. This would not be a problem if all resources were renewable and pollutants noncumulative, but as we know this is not the case. The neoclassical response is that through discounting we can come up with an estimated value of the marginal abatement cost and the marginal damage functions that takes into consideration all costs in the short-run and the long-run associated with pollution. But this analysis is based on an ergodic system. If we accept a non-ergodic system – a future that is uncertain how do we evaluate all future costs associated with pollution and carry out a policyof sustainability?

-Ric Holt