Information Manipulation and Climate Agreements
Fuhai Hong⇑ and Xiaojian Zhao
- Author Affiliations
Fuhai Hong is an assistant professor in the Division of Economics, Nanyang Technological University. Xiaojian Zhao is an assistant professor in the Department of Economics, Hong Kong University of Science and Technology.
Correspondence may be sent to: fhhong@ntu.edu.sg.
The authors thank Larry Karp, Madhu Khanna, Jinhua Zhao, two anonymous referees, and participants in the Conference on Global Environmental Challenges: the Role of China for their helpful comments.
Abstract
It appears that news media and some pro-environmental organizations have the tendency to accentuate or even exaggerate the damage caused by climate change. This article provides a rationale for this tendency by using a modified International Environmental Agreement (IEA) model with asymmetric information. We find that the information manipulation has an instrumental value, as it ex post induces more countries to participate in an IEA, which will eventually enhance global welfare. From the ex ante perspective, however, the impact that manipulating information has on the level of participation in an IEA and on welfare is ambiguous.
Key words
Asymmetric information climate change information transmission international environmental agreements
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CONCLUSION/CONCLUSÃO:
This article offers a rationale for the phenomenon of climate damage accentuation or exaggeration on the part of the international mainstream media or other pro-environmental organizations. Forming a binding IEA to curb climate change is a matter of urgency (see, e.g., Beccherle and Tirole 2011). The IEA literature generally takes the pessimistic view that an IEA has little chance of success in resolving the climate problem because strong free-riding incentives prevent a sufficient number of countries from participating in that agreement. Using a modified IEA model with two states and asymmetric information, we show that the aforementioned exaggeration of climate damage may alleviate the problem of insufficient IEA participation. When the media or pro-environmental organizations have private information on the damage caused by climate change, in equilibrium they may manipulate this information to increase pessimism regarding climate damage, even though the damage may not be that great. Consequently, more countries (with overpessimistic beliefs about climate damage) will be induced to participate in an IEA in this state, thereby leading to greater global welfare expost. In essence, overpessimism mitigates the problem of underparticipation that is caused by free-riding incentives. However, because people update their beliefs using the Bayesian rule, such information manipulation has a negative externality on the other state when climate damage is really huge, in which case the aforementioned information provider will not be sufficiently trusted even if it indicates the true state. As a result, the participation level falls further in this situation. Overall, information manipulation has an ambiguous effect on IEA membership and global welfare from the ex ante perspective.
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This article offers a rationale for the phenomenon of climate damage accentuation or exaggeration on the part of the international mainstream media or other pro-environmental organizations. Forming a binding IEA to curb climate change is a matter of urgency (see, e.g., Beccherle and Tirole 2011). The IEA literature generally takes the pessimistic view that an IEA has little chance of success in resolving the climate problem because strong free-riding incentives prevent a sufficient number of countries from participating in that agreement. Using a modified IEA model with two states and asymmetric information, we show that the aforementioned exaggeration of climate damage may alleviate the problem of insufficient IEA participation. When the media or pro-environmental organizations have private information on the damage caused by climate change, in equilibrium they may manipulate this information to increase pessimism regarding climate damage, even though the damage may not be that great. Consequently, more countries (with overpessimistic beliefs about climate damage) will be induced to participate in an IEA in this state, thereby leading to greater global welfare expost. In essence, overpessimism mitigates the problem of underparticipation that is caused by free-riding incentives. However, because people update their beliefs using the Bayesian rule, such information manipulation has a negative externality on the other state when climate damage is really huge, in which case the aforementioned information provider will not be sufficiently trusted even if it indicates the true state. As a result, the participation level falls further in this situation. Overall, information manipulation has an ambiguous effect on IEA membership and global welfare from the ex ante perspective.
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Subscription or payment needed/Requer assinatura ou pagamento:
The American Journal of Agricultural Economics
The American Journal of Agricultural Economics
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NOTA CAUSTICANTE DESTE BLOGGER:
Desde quando mentir em ciência a favor de um paradigma é aceitável?
Desde quando mentir em ciência a favor de um paradigma é aceitável?
Perguntem à Nomenklatura científica que é useira e vezeira em mentir e perpetrar fraudes e mentiras para defender paradigmas colapsantes... E em nome da Ciência.
Pobre ciência!!!
Pobre ciência!!!
