Policy Responses to Climate Change in a Dynamic Stochastic Economy

Lars Hansen, University of Chicago

Usage Details

Kenneth Judd, Yongyang Cai, Lars Hansen, Simon Scheidegger, Gregor Reich, Jeremiah Bejarano, Christian Baker, Taylor Canann

Climate change will have substantial impacts the natural world, and on human life, through altered agricultural productivity, changes in the demand for heating and/or cooling, and changes in the flora and fauna that interact with humans. While any policy decisions will have economic impacts measured in the trillions of dollars, there is rather little analysis on the impact and efficacies of alternative choices. Making the challenge even greater is the great uncertainty about what the changes in climate will be, where the effects are great and where the effects are small, and how the economic system will respond to climate change and alternative policies. The target problem for this project is to construct a prototype computational model that will merge the basic elements necessary for any such analysis—a description of the climate and how it reacts to anthropogenic induced changes in the atmosphere, a description of how those changes affect the economy, descriptions of alternative policies, and models of how individual economic agents respond to the uncertainties they face and how policy makers should incorporate their own uncertainties as well as that of private agents into their decisions.

http://www.larspeterhansen.org/research-7.html