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What is the estimated component of pure time preferences used by Nordhaus to calculate the discount rate to be used in evaluating climate change impacts?

Question

What is the estimated component of pure time preferences used by Nordhaus to calculate the discount rate to be used in evaluating climate change impacts?

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Solution

1.5%

Step 1: Understanding Pure Time Preferences Pure time preference is a concept in economics that refers to the preference of individuals to have a good or service now rather than in the future, all else being equal. It is one component used to calculate the discount rate in economic models.

Step 2: Nordhaus and the Discount Rate William Nordhaus is a Nobel Prize-winning economist known for his work on climate change economics. In his models evaluating the economic impacts of climate change, he has used a pure time preference rate of 1.5%.

So, the answer to the question "What is the estimated component of pure time preferences used by Nordhaus to calculate the discount rate to be used in evaluating climate change impacts?" is 1.5%.

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