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Environmental Protection and Rare Disasters

2014 Economica Phillips Lecture

Date: Thursday 20 March 2014 
Time: 6.30-8pm 
Venue: Old Theatre, Old Building
Speaker: Professor Robert J Barro
Chair: Professor Sir Christopher Pissarides

Update Wednesday 29 January, 5pm: Please note that this lecture was previously advertised with the subject title 'Economic Growth and Convergence'.

The Stern Review’s evaluation of environmental protection relies on extremely low discount rates, an assumption criticized by many economists.  The Review also stresses that great uncertainty is a critical element for optimal environmental policies. An appropriate model for this policy analysis requires sufficient risk aversion and fat-tailed uncertainty to get into the ballpark of explaining the observed equity premium.  A satisfactory framework, based on Epstein-Zin/Weil preferences, also separates the coefficient of relative risk aversion (important for results on environmental investment) from the intertemporal elasticity of substitution for consumption (which matters little). Calibrations based on existing models of rare macroeconomic disasters suggest that optimal environmental investment can be a significant share of GDP even with reasonable values for the rate of time preference and the expected rate of return on private capital.  Optimal environmental investment increases with the coefficient of relative risk aversion and the probability and typical size of environmental disasters but decreases with the degree of uncertainty about policy effectiveness.  The key parameters that need to be pinned down are the proportionate effect of environmental investment on the probability of environmental disaster and the baseline probability of environmental disaster.

Robert J Barro is Paul M Warburg Professor of Economics at Harvard University and a senior fellow of the Hoover Institution of Stanford University.

Suggested hashtag for this event for Twitter users: #LSEBarro

This event is free and open to all with no ticket required. Entry is on a first come, first served basis. For any queries email events@lse.ac.uk| or call 020 7955 6043. 

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Slides

A copy of Professor Robert J Barro's powerpoint presentation is available to download at Environmental Protection and Rare Disasters (pdf)|

Podcast & Video 

A podcast and video of this event is available to download from Environmental Protection and Rare Disasters|

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CPD

This event has been certified for CPD| purposes by the CPD Certification Service|. Self-Assessment Record forms will be made available for delegates wishing to record further learning and knowledge enhancement for Continuing Personal and Professional Development (CPD) purposes. For delegates who wish to obtain a CPD Certificate of Attendance, it is the responsibility of delegates to register their details with a LSE steward at the end of the event and as of 1 September 2014 a certificate will be sent within 28 days of the date of the event attended by the CPD Certification Service|.  If a delegate fails to register their details at the event, it will not prove possible to issue a certificate. (For queries relating to CPD Certificates of attendance after a request please phone 0208 840 4383 or email info@cpduk.co.uk|).


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