Reference no: EM131402293 , Length: 2

Assignment

You are the CEOs executive assistant in a closely held family enterprise. Your grandmother, the chairman, is a little skeptical about the value of sending you to a good business school in a foreign country, and has told you she wants to see you prove yourself, by helping her understand how the discipline of economics and political economy can help guide the family enterprise for the long term.

The business you are in - you may choose yourself - is one that is sensitive to climate change and/or climate policy developments. This means that either through climate change itself or through environmental policies, your assets and business prospects may be influenced, positively or negatively.

You have decided you want to respond to her challenge by informing her about:

1) The idea of cost benefit analysis (that is, societal' environmental impacts may be quantified, valued, and included to inform decision making);

2) Why is the discount rate is important in cost-benefit analysis of long-term environmental issues (compared to the benefits from building a factory).

In making this point, you may use the Ramsey formula, and perhaps Heal's five question (and Gunnar's sixth):

a. benefits of mitigation (or abatement benefits)

b. the pure rate of time preference

c. how we look at the marginal utility of consumption, in combination with (this is Gunnar's emphasis) growth, or development prospects

d. whether we want to look at a richer model than one good (often called consumption, or the macro good

e. how we look at uncertainty

f. the costs of mitigation

3) You want to discuss these points with her by relating them directly to the nature of the business that you are in:

a. How is it influenced, if at all, by prospects of climate change directly?

b. How is it influenced, if at all, by prospects of climate policy?

c. To what extent do you think climate policy to which your business is exposed (domestic context, international) will be influenced by the main elements in the cost-benefit analysis?

d. Can you illustrate the potential usefulness of your discussion by indicating to her how this could influence business decisions, and especially investments, divestments, or political engagement?

The analysis may be well suited for displaying your arguments in simple graphs, being careful about what is on the axes, which curves move, and what is represented by movements along the curves. To the extent that you use formulas and deductions, graphs and data, it is if and when it is useful for the message that you want to carry across. Be effective: you have only two pages.

To write well, you should more or less cover the 11 points above, but should probably be selective to just mention most of them picking one or a few to cover in depth, thinking about yourself, your grandmother, your relationship to her, and the nature of the business your family is in.