Shortcomings in current economic thought and practice – now what?

A valuable read on the orders of magnitude of costs related to climate change.

Thanks to Young-Jin Choi for the link.

Quite obviously the numbers in this paper are not predictions as clearly stated by the authors. However, the differences between SCC and the proposed UCC (Table 1) reveal, in my view, fundamental shortcomings in current economic thought and practice.

The characteristic time scale of most financial modeling is de facto set by the discount rates and is often ca. 30 yrs. Beyond that time horizon practically all calculations yield „0“. 

This article underlines that this „classical“ modeling approach in combination with the sole and terrible focus on GDP or GWP is the mathematical pendant to saying „I don’t care about future generations“.

On the scale of enterprises and individual organization, extending the current way of setting priorities beyond „profitable growth“ may be a constructive step forward (e.g. with hybrid portfolio management techniques combining qualitative and financial goals).


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