#MeetTopEnvEcon – Geir Asheim

Geir Asheim

Professor of Economics, University of Oslo
Year of birth: 1953
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Ideas profile

I am happy to present Geir Asheim in the Meet Top Environmental Economists Series. Geir has been instrumental in the development of social choice theory to environmental economics. He authored and co-authored around 80 publications in top journals. In the recent years where pure theory is getting harder and harder to publish and journals are flushed with black box empirics, Geir helps us to understand that all good empirical results must be grounded in good theory. Geir particularly studies as to when some allocations are sustainable and how we can justify these allocations. On the personal side, Geir seems to be a more quiet character, but don’t be misled: his axiomatic approch is deeply entranched in Tango and wine, which some believe may be the underlying reason for his excellent publications.

Could you please give me a brief background of yourself and your main research interests?

I did a PhD in environmental and resource economics 40 years ago with UCSB’s Robert Deacon as my advisor. My dissertation was about a model where more concern for the future might lead to the future becoming worse off. So that was a paradoxical result that caught my interest at that time. The paper was not published at that particular time, it was published 30 years later in 2008. So it is possible that even though results are not published at once they may be published later.

But ever since, from the end of the 70s, I have been interested in solving problems of intergenerational equity and also sustainability, even though sustainability was not a term when I started working on this at the end of the 1970s.

A few years later I had a paper I was working on which was an intergenerational game, in the Dasgupta- Heal-Solow model of capital accumulation and resource depletion, where optimal policies might be time inconsistent. That led me to get an interest in game theory. So I spent a year at Stanford University in the middle of the eighties, and then also in the following 20 years I spent a lot of time on game theoretical research.  

What article or book of ours would you call our best and why?

I would mention two research questions that I have been asking. One is in game theory so I am not going to say too much about that. It is essentially about how to analyse reasoning in games. Through several articles and a book published in 2006 I developed something called “the consistent preferences approach to deductive reasoning in games”, which is concerned with how people reason instead of what they do.  

In the context of intergenerational equity I had a question quite early, namely how to lay normative foundations for a compromise between egalitarianism and development in the Dasgupta-Heal-Solow model of capital accumulation and resource depletion. Maximin leads to Egalitarianism as Solow pointed out, but as Solow also noted it wastes possibility for development. So the economy might be capable of developing, but if you use maximin as a normative criterion you don’t use this possibility for development. Undiscounted utilitarianism might, on the other hand, lead to heavy sacrifices for the present, and discounted utilitarianism in this model leads to heavy sacrifices for the far future. So the question is to find a compromise between, at the one hand, taking advantage of a possibility for development, if that is feasible, and, on the other hand, still taking into account the interest of the present by not requiring too heavy sacrifices, and also making sure that development is sustainable.

And I had a worthy candidate in terms of the efficiency prices of such a compromise already in 1982. Since then I have pursued the idea of how to give normative foundations for this candidate compromise. I’ve given four different ways of supporting this. One was this intergenerational game that I mentioned already in this paper that was published in Rev. Econ. Stud. in 1988. The second one is to use discounted utilitarianism within the set of streams that are normatively acceptable. In a paper in J. Econ. Theory in 1991 and then again with Wolfgang Buchholz and Bertil Tungodden in J. Envion. Econ. Manag in 2001 we show how only non-decreasing streams are normatively acceptable in the Dasgupta-Heal-Solow model. And maximizing the sum of discounted utilities within the set of non-decreasing streams yields the candidate compromise between development and sustainability. The third one was a paper with Tapan Mitra that was published as “Sustainability and discounted utilitarianism in models of economic growth” in Math. Soc. Sci. 59 (2010) 148–169. And the fourth one was with Stéphane Zuber in a paper “Justifying social discounting: the rank-discounted utilitarian approach”, which appeared in J. Econ. Theory 147 (2012) 1572–1601 and where we introduced the concept of Rank-Discounted Utilitarianism.

It’s actually one research question with four different answers and I was pursuing for a period of 30 years how to normatively justify such a compromise.

And so for the readers who are not so familiar with this, if you compare your criteria with the Chichilnisky criterium, in how far would you improve upon the Chichilnisky criterium and under which circumstance?

Chichilnisky’s paper on sustainable preferences is a very important contribution because it points out that undiscounted utilitarianism is essentially a dictatorship of the present. But her paper doesn’t really give any answers in the Dasgupta-Heal-Solow model, because there exists no optimum according to Chichilnisky’s criterion in this model. So it’s not useable.

If you make a sequence of streams that approaches the supremum value of Chichilnisky’s criterium, then the limit of this sequence of streams will be the discounted utilitarian optimum. So Chichilnisky’s criterion doesn’t give an alternative answer.

What is interesting is that the two last criteria that I mentioned, ‘sustainable discounted utilitarianism’ and ‘rank-discounted utilitarianism’, satisfy non-dictatorship of the present and non-dictatorship on the future. So both satisfy the key axioms proposed by Chichilnisky, but put these to use in a manner that is more applicable.

Could you give a list of essential articles that a young researcher in your line of research should read?

I would be careful in doing that because I believe that young researchers should find their own articles that might become essential, as a way of organizing their creative activity. In my case an example of an article like that was “On Hartwick’s rule for regular maximin paths of capital accumulation and resource depletion” published in Rev. Econ. Stud. 47 (1980) 551–556. It’s just a 6-page-paper on Hartwick’s rule.

That’s an example of an article that has been very influential on my own research. It’s a condensed modelling, which still is incredibly rich.

But I don’t want to impose on young researchers particular articles. Young researchers should find articles that they find intriguing and then spend time on understanding these articles, while having a critical attitude to them. They should make sure that they understand what the authors have meant and also try to improve on the analysis in these articles.

Let’s talk about a policy maker, could you give a reference for a policy-oriented article or book that sums up the research in your field?

If you ask about one of my own articles, I could mention one article that was published in a collection of essays in honour of Tom Shelling entitled Climate Change and Common Sense published in 2012. It’s a paper called “Discounting while treating generations equally”, and it is one attempt that I have done to try to bridge the gap between the theoretical research that I have mainly been doing and its applicability for policy makers. The other is an article forthcoming in Science called “The case for a supply-side climate treaty” which you may want to look at.

You have visited many places and universities, you were in Montreal California, Stanford, Munich and Bonn. Which of these places was your favourite one and why?

These kinds of visits have different perspectives. It’s been very valuable to be able to be at these places and meet people and confronted with different people and ideas and different stages of my career. I don’t want to point out to any particular place at the expense of others because people have been incredibly generous and hospitable towards me. So I would not like to try to rank these places.

That is a very fair and equitable answer, which is very much in line with your research. In what direction would you like to see environmental economics develop and what would be the obstacle?

One problem I see today with economic research on climate change is that it seems to stay within two tracks, which might be good for the individual researcher, but might not be good for environmental economics. One of the tracks is integrated assessment modelling. Everybody uses IAMs because everyone else uses IAMs even though there are assumptions in IAMs which might not be very realistic. One such assumption is that the effect on total factor productivity is assumed to continue for the length of the model period. But what happens if actually climate change has an effect on the development of total factor productivity?

So researchers use IAMs because everyone else uses IAMs, and therefore it’s easier to publish the coolest paper, but for the profession it might not be the best solution. And when it comes to theoretical modelling of, for instance, international environmental agreements, then participation based on either internal or external stability or on renegotiation-proofness in repeated interaction seems to be what people are doing. And there are too many people (including papers that I have written myself) that are minor developments in these traditions.

So I feel that new developments are needed, with more emphasis on supply-side policies: policies should directly be related to keeping fossil fuels in the ground. We also need more modelling on what kind of policies or what kind of instruments can be used in order to achieve this.

The second is to study climate change as a security risk. If each country looks at the emissions of the other countries’ greenhouse gases as a threat to their own social or political security, then maybe it will be easier for them to take action. That is particular the case in the US today where I believe climate negotiations are perceived to impose something on them instead of climate policy as being viewed as a means for each country to impose restrictions on others.

If you had to give young researchers in environmental economics some advice what would it be?

I’m a theorist, so sometimes you see examples of papers within environmental resource economics that develop theory parallel to a theory that already exists. I’m not saying that it’s prevalent, it’s just that sometimes you can see this. And of course economic theory extends far beyond environmental resource economics, so if you want to do a theory in the field of environmental and resource economic science it is important to read theory unrelated to your own field. You should also try to publish your work in journals that are unrelated to the field of environmental and resource economics. You might not succeed, but some people do succeed. I would think that that’s important in order to develop your research and of course it must also make it much easier to get good positions if you actually show that you can also publish outside of your field.

How do you mostly get your ideas?

Ideas come from interactions with others, reading the works of others, discussing with others and developing the ideas with others. What is very fruitful is if you’re meeting someone else that has a similar idea as your own and then you jointly try to work out this idea.

It is difficult to say where exactly the beginning of this creative process is. But in order to develop these ideas to something that can be put into papers and communicated with others, then for me it’s very important to be able to discuss these ideas with others.

Are you more interested in fundamental research or do you try to shape actual policy? Which impact does your research have on policy-making?

From the very beginning much of my research has been motivated by how I would like the world to develop. When I started with my research I was worried about the finiteness of non-renewable resources and that they have to be used in an equitable way. More recently it turns out that it’s the atmosphere which really is the finite resource that we have, so now much of my interest is related to climate change. During the last ten years much of my interest has been on the question: How should policies be evaluated if people across space and across time are treated equally? My work on rank-discounted utilitarianism with Stephan Zuber is an example of how you may treat everybody equally: it’s as if you discount the future, but you discount the future because the future will be better off.

How do you think environmental economists could increase their say in the policy agenda?

Social choice theory might be relevant to pointing out what normative criteria yield certain outcomes and that this in turn perhaps influences the decision makers and also influences the voters. That’s one way the kind of social choice theory that I’ve been doing might be relevant.

But it might also be that we actually should use more political economy approaches and take the preference of the decision makers as the point of the departure. It might be that one can point to ways that decision makers with their actual preferences can make bargains that are good for everybody. It might be that the decisions that are made in this way are not ethically attractive.

But I do believe that in order to be relevant in the field of climate change, it is necessary to take into account preferences that decision makers actually have.

Aren’t we often simply too consequentialist? I have the feeling that social choice theorists tend to select those axioms that lead to those outcomes that they want to see.

A frame of reference that I have used is that it is not possible to get criteria that are good in all circumstances. When economists use discounted utilitarianism they think about the simple one-sector model where discounting is smaller than the net rate of productivity, so we get a nice growth path. In this model there is no conflict between the criterion and the outcome, the outcome is good, so there is no problem in using the criterion. But one important result is that undiscounted utilitarianism is a terrible criterion if resources are put into this model.

And of course then we need to think about what kind of criterion will give good outcomes in also wider sets of circumstances, and climate change is also changing our thoughts because it might open up the possibilities that future generations actually will be worse off than us. It’s not sufficient that we maintain our reproductive capital, but we have to take care of environmental and resource capital as well.

So for me, looking at environmental and resource economics and the issues that are posed in this field, means that you can ask new questions in social choice theory. Moreover, it becomes more demanding to find criteria that actually will give good outcomes in a wider setting of circumstances.

And coming back to integrated assessment modelling, it also becomes much more important what kind of criterion we actually would want to use in such a model, and also what kind of criterion actually corresponds to the decisions that people will want to take in the kind of circumstances that might arise in the future. Now I am speaking beyond the kind of formal research that I have done, but these are issues that I think are interesting.

When Arrow wrote his impossibility theorem he essentially used three axioms: non dictatorship, pareto efficiency and independence of irrelevant alternatives. Then Koopmans derived discounted utilitarianism using five axioms. Now there is a whole proliferation of axioms. Do you think that this makes everything too complicated? Do these additional axioms really help us in our choices, if we anyway only care about the final outcome based on our reflective equilibrium?

I would agree to what you’re implicating by your question. I think good social choice theory needs simple and few axioms. If we can characterise criteria by the use of simple and few axioms then we’re also informative.

The simplicity of axioms is maybe more important than whether they actually are attractive. It might be that a criterion that we would like is based on simple axioms that might not be very compelling. Still, as a social choice theory, it’s interesting to be able to find connections between some kind of seemingly attractive criterion and some kind of simple normative property that might be difficult to support. But, in any case, simplicity of axioms is a good thing.

Should axioms or the resulting welfare ordering be more explicitly used in environmental policy making?

If decisions are made by decision-makers that for instance are democratically elected, we have to respect these preferences, restricting ourselves to making sure that decisions are consistent or efficient. So we don’t make decisions, we suggest what good outcomes might be. But if we actually are giving practical advice to decision-makers, then we also have to make sure that we follow their preferences when it comes to inequality and also when it comes to distribution across time.

So your argument is that for real world advice we should use the discounted utilitarian criterion because it’s more reflective and not use any of your welfare criterion.

That’s essentially what I am saying. But it might be that the voters and also the policy makers will want to take into account the interest of future generations when they take decisions. There are reasons why we might collectively want to take into account the future to a greater extent than we want to individually. It doesn’t mean necessarily that the decisions that people make in the market place give the whole answer how we should discount the future. Over and beyond that, we can point to the consequences that might not be attractive if we follow the actual preferences.

But if we actually help implementing policy, we cannot put our own preferences into influencing the decision-making in a way that is not consistent with the voters.

There is overlap between environmental economics and behavioural economics and there are people in this overlap that think in terms of how we can fool people into making better decisions when it comes to environmental issues. I am sceptical towards that because it leads to less transparency and also leads to people having less confidence in the advice that environmental economists will give. We see this in the climate scepticism that it can be very damaging if the general public believes that they are driven by the economist’s own normative interests or preferences, rather than the actual preferences of the people.

There is also the problem of selected transmission of information. I did have a paper on this a few years ago (“Strategic Use of Environmental Information”, published in Environ. Resource. Econ 46, 2010, 207–216) where there could possibly come information showing that climate change is not as bad after all, and then a benevolent environmental agency could either publish this information or not publish it.

But if people actually take into account environmental issues a bit but not sufficiently due to the free rider problem, then people might understand that the benevolent environmental agency would prefer to withhold this information.

So if there is something in your discipline that you could change what would it be?

One thing that is important for the discipline of economics is the way that the journals are run. There are two issues. We all know that publishing economics paper takes a lot of time. I am of the opinion that this is a good process. Too much is written and it is important that what we are writing is going through a revision process that is thorough. That is a good thing!

But there’s also another issue: that commercial publishers are getting the copyright to our work and that’s a problem. Our research is mostly financed by national or international bodies. But when we publish the research, then this does not become the property of the ones that have financed the research. That’s not a good system.

So it’s a very interesting question as to how to change the system. In environmental economics there have been some good examples with e.g. the JAERE, which was established a few years ago in order to get more control of the publishing process.

You’ve just passed the magical barrier of 65 years, if I might say that. What are your aspirations for the future?

First of all I do not have to retire before five more years from now, so I still will be able to work if other circumstances allow me to do that. But as I mentioned before, I will be interested in the question on how economists can contribute better to the actual decision making on climate change by facilitating actions that are both economically efficient and equitable. It’s clear that climate change is wasteful and there must be some efficiency gains that can be achieved., But we also want to do this in a way that is equitable: If I can contribute to this, I would be very glad.

I heard that you regularly skip sessions at conferences to go and dance tango with Cees. Is that true or are these rumours?

I do dance tango occasionally, but these milongas are at night, so I don’t have to skip sessions for that.

Would you skip sessions for tango?

That’s a hypothetical question.

Do you know the concept of holidays or do you take your papers to the beach?

Every day has both work and vacation for me. So I always work in the mornings independently of whether it’s vacation or not. No day is all work, no day is all vacation, I’ve always been in the habit of combining the two. My version of it is that I always can have a bit of vacation every day. Some other people would claim that I always take a little bit of work with me, but that’s how I like to do it.

Who would you like to see next in this series?

I want to mention two names. The first one is Tapas Mitra who is an economist that I admire.  He is very, very thorough in his work, he never skips a step in the proof, and everything is done very thoroughly. It is a great discipline to have worked with him. I think he is a good example for many others. (Unfortunately Tapan Mitra died just 4 weeks after I did the interview with Geir.)

I would also suggest Bård Harstad, who is the economist in the world today in our field that has the most publications in top 5 journals. He nevertheless is in environmental and resource economics, so that is someone I’d suggest you interview in this field.

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