Choosing in the Dark: Incomplete Preferences, and Climate Policy

I consider decision-making when the stakes are high, but information is poor, and outcomes may be far from our experience. My leading example is climate change. We do not know the probabilities of diverse outcomes; we disagree about societal impatience, risk, and inequality aversion. I offer a simple model of “justifiable acts”, providing maximal agreement between decision theories, and facilitating quantification of the remaining disagreement. When this disagreement is large, I characterise the choice situation as “dismal”. I demonstrate that the question of climate policy is “dismal”. This illuminates how subjective much of the literature on climate change economics really is, and so how poor a guide to policy this literature may form. The “dismal” framework here generalises Weitzman’s (2009a) “dismal theorem”, giving a broader view, which shows that it may be unnecessary or unwise to focus on highly unlikely events.