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Climate Economics Seminar: What's Wrong with Infinity -- A Note on Weitzman's Dismal Theorem

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Date(s): April 1, 2009 (10:30 am to 12:00 noon), Room 4144 EPA West, 1301 Constitution Ave., NW, Washington, DC

Location: Room 4144, EPA West

Contact: Ann Wolverton, Email: wolverton.ann@epa.gov; for entrance by non-EPA employees: Carl Pasurka, Email: pasurka.carl@epa.gov

Presenter: Andreas Lange (University of Maryland)

Description: Dr. Lange will discuss the meaning of Weitzman's (2008) dismal theorem, and demonstrate that his indicator of marginal expected rate of substitution is of limited relevance for cost-benefit analysis: cost-benefit analysis under uncertainty must jointly consider marginal willingness and the options/technologies of transferring income. Dr. Lange's approach shows that an infinite expected marginal willingness to substitute between today's and future's consumption does not generally jeopardize cost-benefit-analysis.

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