John Wiley & Sons, Ltd.

Model uncertainty in economic impacts of climate change: Bernoulli versus Lotka Volterra dynamics

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Courtesy of John Wiley & Sons, Ltd.

The dynamic economic behavior in most Integrated Assessment Models linking economic growth to climate change involves a differential equation solved by Jacob Bernoulli in 1695. Using the Dynamic Integrated Climate‐ Economy Model DICE and freezing exogenous variables at initial values, this dynamics is shown to produce implausible projections on a 60 year time frame: If world capital started at 1$, after 60 years the world economy would be indistinguishable from one starting with ten times the current capitalization. Such behavior points to uncertainty at the level of the fundamental dynamics, and suggests that discussions of discounting, utility, damage functions and ethics should be conducted within a more general modeling vocabulary. Lotka Volterra dynamics is proposed as an alternative with greater prime facie plausibility. With near universality economists assume that economic growth will go on forever. Lotka Volterra dynamics alert us to the possibility of collapse. Integr Environ Assess Manag © 2012 SETAC

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