We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to generate observed frequencies of price changes, the model can account for several aggregate regularities. In particular, price reductions are larger but less frequent than price increases, and prices respond considerably faster to cost increases than to cost decreases. The latter asymmetry is more pronounced when input prices are less volatile, as documented by Pelzman (2000).

Aimed at pandemic preparedness, we construct a framework for integrated epi-econ assessment that we believe would be useful for policymakers, especially at the early stages of a pandemic outbreak. We offer theory, calibration to micro-, macro-, and epi-data, and numerical methods for quantitative policy evaluation. The model has an explicit microeconomic, market-based structure. It highlights trade-offs, within period and over time, associated with activities that involve both valuable social interaction and harmful disease transmission. We compare market solutions with socially optimal allocations. Our calibration to Covid-19 implies that households shift their leisure and work activities away from social interactions. This is especially true for older individuals, who are more vulnerable to disease. The optimal allocation may or may not involve lockdown and changes the time allocations significantly across age groups. In this trade-off, people's social leisure time becomes an important factor, aside from deaths and GDP. We finally compare optimal responses to different viruses (SARS, seasonal flu) and argue that, going forward, economic analysis ought to be an integral element behind epidemiological policy.

We develop a quantitative macroeconomic theory of input-saving technical change to analyze how markets economize on scarce natural resources, with an application to fossil fuel. We find that aggregate US data call for a very low short-run substitution elasticity between energy and the capital/labor inputs. Our estimates imply that energy-saving technical change took off when the oil shocks hit in the 1970s. This response implies significant substitutability with the other inputs in the long run: even under ever-rising energy prices, long-run consumption growth is still possible, along with a modest factor share of energy.

There is a scientific consensus that human activities, in the form of emissions of carbon dioxide intothe atmosphere, cause global warming. These emissions mostly occur in the marketplace, that is,they are undertaken by private individuals and firms. Governments seeking to curb emissions thusneed to design policies that influence market behavior in the direction of their goals. Economistsrefer to Pigou taxation as “the” solution here, since the case of global warming can be seen as apure (negative) externality. We agree. However, given the reluctance of policymakers to agree withus, there is an urgent need to consider, and compare, suboptimal policies. In this paper, we look atone such instance: setting a global tax on carbon at the wrong level. How costly are different errors?Since there is much uncertainty about how much climate change there will be, and how damagingit is when it occurs, ex-post errors will most likely be made. We compare different kinds of errorsqualitatively and quantitatively and find that policy errors based on over-pessimistic views on climatechange are much less costly than those made based on over-optimism. This finding is an inherentfeature of standard integrated assessment models, even though these models do not feature tippingpoints or strong linearities.

Climate policy is a complex area that requires input from many different perspectives. The sns Economic Policy Council 2020 comprises nine researchers from a range of disciplines, with different backgrounds and with varied opinions on the debate surrounding climate policy. They analyse Swedish climate policy in a global context, describing the causes and consequences of climate change and focusing on how policy can achieve the desired reductions in carbon emissions. The report also provides answers to questions that are frequently discussed in the Swedish debate, such as the effectiveness of climate aid and whether Sweden should generate a larger surplus of fossil-free electricity for export.

Today, more than ever, 'Spaceship Earth' is an apt metaphor as we chart the boundaries for a safe planet(1). Social scientists both analyse why society courts disaster by approaching or even overstepping these boundaries and try to design suitable policies to avoid these perils. Because the threats of transgressing planetary boundaries are global, long-run, uncertain and interconnected, they must be analysed together to avoid conflicts and take advantage of synergies. To obtain policies that are effective at both international and local levels requires careful analysis of the underlying mechanisms across scientific disciplines and approaches, and must take politics into account. In this Perspective, we examine the complexities of designing policies that can keep Earth within the biophysical limits favourable to human life.

Reducing greenhouse gas emissions to limit damage to the global economy climate-change-induced and secure the livelihoods of future generations requires ambitious mitigation strategies. The introduction of a global carbon tax on fossil fuels is tested here as a mitigation strategy to reduce atmospheric CO2 concentrations and radiative forcing. Taxation of fossil fuels potentially leads to changed composition of energy sources, including a larger relative contribution from bioenergy. Further, the introduction of a mitigation strategy reduces climate-change-induced damage to the global economy, and thus can indirectly affect consumption patterns and investments in agricultural technologies and yield enhancement. Here we assess the implications of changes in bioenergy demand as well as the indirectly caused changes in consumption and crop yields for global and national cropland area and terrestrial biosphere carbon balance. We apply a novel integrated assessment modelling framework, combining three previously published models (a climate-economy model, a socio-economic land use model and an ecosystem model). We develop reference and mitigation scenarios based on the narratives and key elements of the shared socio-economic pathways (SSPs). Taking emissions from the land use sector into account, we find that the introduction of a global carbon tax on the fossil fuel sector is an effective mitigation strategy only for scenarios with low population development and strong sustainability criteria (SSP1 Taking the green road). For scenarios with high population growth, low technological development and bioenergy production the high demand for cropland causes the terrestrial biosphere to switch from being a carbon sink to a source by the end of the 21st century.

A large increase in government spending following resource discoveries often entails political risks, inefficient investments and increased volatility. Setting up a sovereign wealth fund with a clear spending constraint may decrease these risks. On the other hand, in a capital scarce developing economy with limited access to international borrowing, such a spending constraint may lower welfare by reducing domestic capital accumulation and hindering consumption increases for the currently poor. These two contradicting considerations pose a dilemma for policy makers in deciding whether to set up a sovereign wealth fund with a spending constraint. Using Uganda's recent oil discovery as a case study, this paper presents a quantitative macroeconomic analysis and examines the potential loss of constraining spending through a sovereign wealth fund with a simple spending rule. We find that the loss is relatively low and unlikely to dominate the political risks associated with increased oil spending. Thus, such a spending constraint appears well warranted.