Journal
ENVIRONMENTAL & RESOURCE ECONOMICS
Volume 17, Issue 3, Pages 299-310Publisher
KLUWER ACADEMIC PUBL
DOI: 10.1023/A:1026428314806
Keywords
cost-benefit analysis; distributional weights; global warming; utility transformations; welfare theory
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This paper discusses the use of distributional weights in CBA based on a general Bergson-Samuelson SWF. In particular it illustrates some consequences of applying a SWF characterized by constant inequality aversion (which includes classical utilitarianism as a special case), together with a constant relative risk aversion utility function, when calculating the damage costs of global warming. It extends and clarifies earlier unintuitive results, and emphasizes that utility must be seen as fully cardinal in terms of levels in this context. In the special case of utilitarianism, on the other hand, it is sufficient to be able to make interpersonal comparisons of utility changes.
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