A Third Wave in the Economics of Climate Change

Date: 01 October 2015

Modellingtheeconomicsofclimatechangeisdaunting.Manyexistingmethodolo- gies from social and physical sciences need to be deployed, and new modelling techniques and ideas still need to be developed. Existing bread-and-butter micro- and macroeconomic tools, such as the expected utility framework, market equilibrium concepts and representative agent assumptions, are far from adequate. Four key issues—along with several others—remain inadequately addressed by economic models of climate change, namely: (1) uncertainty, (2) aggregation, heterogeneity and distributional implications (3) technological change, and most of all, (4) realistic damage functions for the economic impact of the physical consequences of climate change. This paper assesses the main shortcomings of two ...

J. Doyne Farmer Cameron Hepburn Alexander Teytelboym Penny Mealy

Complexity Economics Economics of Sustainability

A Third Wave in the Economics of Climate Change


Type: paper

Farmer, J.D., Hepburn, C., Mealy, P. & Teytelboym, A. (2015). 'A Third Wave in the Economics of Climate Change'. Environmental and Resource Economics, 62(2), pp.329–357


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