Fredrik Hansen, Senior Assistant Lecturer at the Economics department, will present his paper "The Stern Review and its Critics: Putting Economics at Work in an Interdisciplinary Setting" at the thirteenth World Congress of Social Economics, to be held in Montréal (Canada) from June 28th to July 1st. The working paper is not available yet. For more information, please contact Fredrik Hansen at fha@du.se.
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The Stern Review and its Critics: Putting Economics at Work in an Interdisciplinary Setting
Abstract
The Stern Review (hereafter the Review) has had a remarkable impact on climate change research. After the presentation of the Review in 2006 an intense and interesting debate has followed. In this paper we analyze the Review and the debate that followed with an emphasis on the interaction between the economics of climate change and the (interdisciplinary) research area of climate change. A central issue has been what discount rate to use having bearing on the fundamental question of what role ethics plays in welfare economic analyses. Some have argued against incorporating any ethical dimensions while others think the Review involves too little. There are also those who have doubted the Review presenting an economical analysis.
Basically four results are reached in this paper. First, the Review involves different kinds of interdisciplinarity using the Mäki (2007) characterization of the term. The cost-benefit analysis based on climate change research demonstrates a division of labor (between natural sciences and welfare economics) typical for multi-disciplinarity. But the interaction between economics and ethics goes deeper and is more appropriate to be characterized as inter-disciplinarity (or close to it). Second, the role of the discount rate is vital to the economics of climate change. Given the understandable long time span that is under consideration in the Review, 200 years, ethical considerations must be incorporated when deciding upon an appropriate discount rate. That is, separating economics and ethics is not preferable concerning climate change. Third, there is a lack of involvement with other economic approaches in the Review besides the neoclassical welfare economic approach. That is, from an intradisciplinary perspective economics is poorly integrated in the interdisciplinary research area of climate change. Among the lacking appropriate economic approaches there are behavioral economics, financial economics (both behavioral and neoclassical) and institutional economics. Fourth and last, we return to the question of the Review being an economical analysis or not. The Review has managed to make an impact on the research area of climate change. Part of this success is probably related to its non-standard approach. But given the reactions to the Review, for some this challenging part has gone too far. It is therefore motivated to ask what is the most important for attempts like the Review: being able to influence climate change research or being in line with mainstream economic approach. In this paper it is argued for the first alternative.
