Operating Systems and System Programming

CONFERENCE ON AMBIGUITY, UNCERTAINTY, AND CLIMATE CHANGE http://calclimate.wordpress.com Session 2: Economics of Ambiguity and Ambiguity Aversion Speakers: Sujoy Mukherji, Paolo Ghirardato and Ani Guerdjikova Over the past decade, there has been considerable progress in the economic theory of ambiguity and ambiguity aversion, involving decisions where the decision maker does not know, or is uncertain about, the probabilities attached to various potential outcomes. This is an appropriate characterization of the current understanding of many facets of climate change science: the uncertainty is pervasive and profound, with many unknowns, and unknown unknowns, that cannot be characterized in terms of a conventional probability distribution. The conference explores the application of developments in the economic theory of ambiguity to climate change policy, including both mitigation policy (the reduction of greenhouse gas emissions) and adaptation policy (coping with the consequences of climate change). Some, but not all, of the fog of uncertainty will gradually dissipate over time, but meanwhile policy decisions have to be made now, whether for mitigation or adaptation. Climate change policy analysis needs to reflect not only the prevailing uncertainty and ambiguity, but also the anticipated future resolution of uncertainty and ambiguity. The challenge is to incorporate risk and risk aversion, ambiguity and ambiguity aversion, and learning, more adequately into the formulation of a framework for decision making on climate change policy. This is the central focus of the conference. To explore this issue, the conference brings some leading researchers on the economic theory of uncertainty and ambiguity and the economics of climate change together with some leading climate scientists and modelers. Some of the invitees have been asked to make formal presentations or provide formal comments; others invitees are expected to contribute to the discussion from the floor.