"Shadow Price" Of Each Person's Lifetime Economic Cost To Society Takes Into Account Global Warming, Other Factors

New Haven, Conn. -- When figuring the cost of raising a child to adulthood, most parents think in terms of ballet slippers, baseball gloves, and college tuition. Two Yale economists have taken the concept a step further by figuring the lifetime cost to society of each person in terms of impact on living standards and the environment. Costs are substantial, ranging from more than $100,000 per person in high-income countries to about $2,500 per person in the lowest-income countries.

"There is a deep dispute about the impact of population growth on future living standards," said William D. Nordhaus, economics professor at Yale University, a leader in attempts to estimate the future economic impacts of global warming. "We calculate three ways an extra person affects the economy -- he or she consumes natural resources, requires a share of capital resources such as buildings and computers, and generates carbon emissions that contribute to global warming. These are societal costs beyond what a parent pays to raise a child."

Using variants of two economic models he developed to analyze global warming costs, Nordhaus estimates the "shadow price" of a person -- the economic cost that an additional person and his or her descendants impose on society. "For countries at all income levels, the annuitized shadow price of a person comes out to about 30 percent of per capita Gross Domestic Product," said Nordhaus, who developed the index with Yale graduate student Joseph Boyer.

Nordhaus reported his findings on Feb. 15 at the annual meeting of the American Association for the Advancement of Science in Philadelphia in a talk titled "What are the External Costs of More Rapid Population Growth? Theoretical Issues and Empirical Estimates."

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Contact: Cynthia Atwood
cynthia.atwood@yale.edu
203 432-1326
Yale University
15-Feb-1998