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For all of their focus on asset prices, financial economists rarely ask if assets are priced ethically--that is, if their prices are compatible with the public good. Yet in a world facing major, possibly catastrophic problems--global warming, for instance, and growing inequality--it is now more important than ever that we allocate capital to projects that will benefit society as a whole, not just today but far into the future. In this book, Christian Gollier develops a powerful method for transforming our societal goals of collective prosperity into the cornerstone of our financial decision making. Ethical Asset Valuation and the Good Society starts by stating transparent moral principles and, from these, derives simple rules that can be used to evaluate saving and investment decisions in terms of the public good. Rather than trying to explain observed asset prices, Gollier derives what these prices ought to be in order to direct capital toward socially desirable investments. He focuses especially on the two prices that drive most financial decisions--the price of time as reflected in the interest rate and the price of risk--and explores the role these play in our long-term planning. If investment projects in renewable energy could be financed at a lower interest rate than those linked to fossil fuels, for instance, the energy transition would be easier to accomplish. Building on criticism of the short-term thinking of financial markets, Gollier suggests ways to shift investment toward the future through the discounting of the valuation of assets and investments with long-term benefits. In this sophisticated but accessible work, Gollier builds a bridge between welfare economics and finance theory to provide a framework for ethical valuation capable of establishing what asset prices should be on the basis of our shared moral values

Recommended readings (Machine generated): 1. Daniel Bernoulli (1954), 'Exposition of a New Theory on the Measurement of Risk', trans. by Louise Sommer, Econometrica, 22 (1), January, 23-36 -- 2. Milton Friedman and L.J. Savage (1948), 'The Utility Analysis of Choices Involving Risk', Journal of Political Economy, 56 (4), August, 279-304 -- 3. John W. Pratt (1964), 'Risk Aversion in the Small and in the Large', Econometrica, 32 (1-2), January-April, 122-36 -- 4. Michael Rothschild and Joseph Stiglitz (1970), 'Increasing Risk: I. A Definition', Journal of Economic Theory, 2 (3), September, 225-43 -- 5. Paul A. Samuelson (1963), 'Risk and Uncertainty: The Fallacy of the Law of Large Numbers', Scientia, 57 (6), 1-6 -- 6. Larry G. Epstein and Stephen M. Tanny (1980), 'Increasing Generalized Correlation: A Definition and Some Economic Consequences', Canadian Journal of Economics, 13 (1), 16-34 -- 7. Louis Eeckhoudt and Harris Schlesinger (2006), 'Putting Risk in its Proper Place', American Economic Review, 96 (1), March, 280-8 -- 8. Christian Gollier and John W. Pratt (1996), 'Risk Vulnerability and the Tempering Effect of Background Risk', Econometrica, 64 (5), September, 1109-23 -- 9. Charles A. Holt and Susan K. Laury (2002), 'Risk Aversion and Incentive Effects', American Economic Review, 92 (5), December, 1644-55 -- 10. Kenneth J. Arrow (1963), 'Uncertainty and the Welfare Economics of Medical Care', American Economic Review, 53 (5), December, 941-73 -- 11. Artur Raviv (1979), 'The Design of an Optimal Insurance Policy', American Economic Review, 69 (1), March, 84-96 -- 12. Jan Mossin (1968), 'Aspects of Rational Insurance Purchasing', Journal of Political Economy, 76 (4), July-August, 533-68 -- 13. Isaac Ehrlich and Gary S. Becker (1972), 'Market Insurance, Self-Insurance, and Self-Protection', Journal of Political Economy, 80 (4), July-August, 623-48 -- 14. Robert Wilson (1968), 'The Theory of Syndicates', Econometrica, 36 (1), January, 119-32 -- 15. Robert M. Townsend (1994), 'Risk and Insurance in Village India', Econometrica, 62 (3), May, 539-91 -- 16. Agnar Sandmo (1971), 'On the Theory of the Competitive Firm under Price Uncertainty', American Economic Review, 61 (1), March, 65-73 -- 17. Jacques H. Drèze and Franco Modigliani (1972), 'Consumption Decisions Under Uncertainty', Journal of Economic Theory, 5 (3), December, 307-35 -- 18. Kenneth J. Arrow and Anthony C. Fisher (1974), 'Environmental Preservation, Uncertainty and Irreversibility', Quarterly Journal of Economics, 88 (2), May, 312-19 -- 19. Robert Pindyck (1991), 'Irreversibility, Uncertainty and Investment', Journal of Economic Literature, 29 (3), September, 1110-48

Our path of economic development has generated a growing list of environmental problems including the disposal of nuclear waste, exhaustion of natural resources, loss of biodiversity, climate change, and polluted land, air, and water. All these environmental problems raise the crucial challenge of determining what we should and should not do for future generations. It is also central to other policy debates, including, for example, the appropriate level of public debt, investment in public infrastructure, investment in education, and the level of funding for pension benefits and for researc.

Our path of economic development has generated a growing list of environmental problems including the disposal of nuclear waste, exhaustion of natural resources, loss of biodiversity, climate change, and polluted land, air, and water. All these environmental problems raise the crucial challenge of determining what we should and should not do for future generations. It is also central to other policy debates, including, for example, the appropriate level of public debt, investment in public infrastructure, investment in education, and the level of funding for pension benefits and for researc

Using the extended Ramsey rule, the socially efficient rate is the difference between a wealth effect and a precautionary effect of economic growth. This second effect is increasing in the degree of uncertainty affecting the future. In the literature, it is usually calibrated by estimating the historical volatility of the growth of GDP in a specific country. In this paper, I show that using cross-section data tends to magnify uncertainty, and to reduce the discount rate. Using a data set covering 190 countries over the period 1969-2010, I justify using a much smaller discount rate around 0.7% per year for time horizons exceeding 40 years.

AbstractI calibrate an eco-epidemiological age-structured Susceptible-Infected-Recovered (SIR) model of the B.1.1.7 covid variant on the eve of the vaccination campaign in France, under a stop-and-go lockdown policy. Three-quarters of the welfare benefit of the vaccine can be achieved with a speed of 100,000 full vaccination per day. A 1-week delay in the vaccination campaign raises the death toll by approximately 2500, and it reduces wealth by 8 billion euros. Because of the large heterogeneity of the rates of hospitalization and mortality across age classes, it is critically important for the number of lives saved and for the economy to vaccinate older people first. Any departure from this policy has a welfare cost. Prioritizing the allocation of vaccines to the most vulnerable people save 70,000 seniors, but it also increases the death toll of younger people by 14,000. Vaccine nationalism is modeled by assuming two identical Frances, one with a vaccine production capacity and the other without it. If the production country vaccinates its entire population before exporting to the other, the global death toll would be increased by 20 %. I also measure the welfare impact of the strong French anti-vax movement, and of the prohibition of an immunity passport.