Priority for the Worse Off and the Social Cost of Carbon

The social cost of carbon (SCC) is a monetary measure of the harms from carbon emission. Specifically, it is the reduction in current consumption that produces a loss in social welfare equivalent to that caused by the emission of a ton of CO2. The standard approach is to calculate the SCC using a discounted-utilitarian social welfare function (SWF)—one that simply adds up the well-being numbers (utilities) of individuals, as discounted by a weighting factor that decreases with time. The discounted-utilitarian SWF has been criticized both for ignoring the distribution of well-being, and for including an arbitrary preference for earlier generations. Here, we use a prioritarian SWF, with no time-discount factor, to calculate the SCC in the integrated assessment model RICE. Prioritarianism is a well-developed concept in ethics and theoretical welfare economics, but has been, thus far, little used in climate scholarship. The core idea is to give greater weight to well-being changes affecting worse off individuals. We find substantial differences between the discounted-utilitarian and non-discounted prioritarian SCC

Measuring loss aversion under ambiguity: a method to make prospect theory completely observable

We propose a simple, parameter-free method that, for the first time, makes it possible to completely observe Tversky and Kahneman’s (1992) prospect theory. While methods exist to measure event weighting and the utility for gains and losses separately, there was no method to measure loss aversion under ambiguity. Our method allows this and thereby it can measure prospect theory’s entire utility function. Consequently, we can properly identify properties of utility and perform new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility was concave for gains and convex for losses and there was substantial loss aversion. Both utility and loss aversion were the same for risk and ambiguity, as assumed by prospect theory, and sign-comonotonic trade-off consistency, the central condition of prospect theory, held

Operator theory and function theory in Drury-Arveson space and its quotients

The Drury-Arveson space $H^2_d$, also known as symmetric Fock space or the $d$-shift space, is a Hilbert function space that has a natural $d$-tuple of operators acting on it, which gives it the structure of a Hilbert module. This survey aims to introduce the Drury-Arveson space, to give a panoramic view of the main operator theoretic and function theoretic aspects of this space, and to describe the universal role that it plays in multivariable operator theory and in Pick interpolation theory.Comment: Final version (to appear in Handbook of Operator Theory); 42 page

Cowries in the archaeology of West Africa: the present picture

Despite the perceived importance of cowrie shells as indicators of long-distance connections in the West African past, their distribution and consumption patterns in archaeological contexts remain surprisingly underexplored, a gap that is only partly explicable by the sparse distribution of archaeological sites within the sub-continent. General writings on the timeline of importation of cowries into West Africa often fail to take into account the latest archaeological evidence and rely instead on accounts drawn from historical or ethnographic documents. This paper is based on a first-hand assessment of over 4500 shells from 78 sites across West Africa, examining chronology, shell species and processes of modification to assess what distribution patterns can tell us about the history of importation and usage of cowries. These first-hand analyses are paralleled by a consideration of published materials. We re-examine the default assumption that two distinct routes of entry existed — one overland from North Africa before the fifteenth century, another coming into use from the time sea links were established with the East African coast and becoming predominant by the middle of the nineteenth century. We focus on the eastern part of West Africa, where the importance of imported cowries to local communities in relatively recent periods is well known and from where we have a good archaeological sample. The conclusion is that on suitably large assemblages shell size can be an indication of provenance and that, while the present archaeological picture seems largely to confirm historical sources, much of this may be due to the discrepancy in archaeological data available from the Sahara/Sahel zone compared to the more forested regions of the sub-continent. Future archaeological work will clarify this matter

Truth or precision? Some reflections on the economists’ failure to predict the financial crisis

The failure of professional economic forecasters to predict the financial crises has led many to question the credibility of modern economics as a reliable foundation for economic policy. If economists were unable to foresee so big a crisis, how can they be trusted to cure or prevent it? Several accounts of this failure exist. The paper offers a tentative answer based on the lessons that may be drawn from the wisdom of a short list of past and present economists: Hayek, Neville Keynes, Mankiw, Tinbergen, Maynard Keynes and Lucas. The glue to keep such an odd bunch together is the distinction between truth and precision provided by science historian Ted Porter

‘Sub-Prime’ Water, Low-Security Entitlements and Policy Challenges in Over-Allocated River Basins: the Case of the Murray–Darling Basin

Environmental policy is often implemented using market instruments. In some cases, including carbon taxing, the links between financial products and the environmental objectives, are transparent. In other cases, including water markets, the links are less transparent. In Australia’s Murray–Darling Basin (MDB), financial water products are known as ‘entitlements’, and are similar to traditional financial products, such as shares. The Australian water market includes ‘Low Security’ entitlements, which are similar to ‘sub-prime’ mortgage bonds because they are unlikely to yield an amount equal to their financial worth. Nearly half the water purchased under the Murray–Darling Basin Plan for environmental purposes is ‘Low Security’. We suggest that the current portfolio of water held by the Australian Government for environmental purposes reflects the mortgage market in the lead-up to the global financial crisis. Banks assumed that the future value of the mortgage market would reflect past trends. Similarly, it is assumed that the future value of water products will reflect past trends, without considering climate change. Historic records of allocations to ‘Low Security’ entitlements in the MDB suggest that, in the context of climate change, the Basin Plan water portfolio may fall short of the target annual average yield of 2075 GL by 511 GL. We recommend adopting finance sector methods including ‘hedging’ ‘Low Security’ entitlements by purchasing an additional 322–2755 GL of ‘Low Security’, or 160–511 GL of ‘High Security’ entitlements. Securing reliable environmental water is a global problem. Finance economics present opportunities for increasing the reliability of environmental flows