ABSTRACT
Environmental-policy makers are challenged by pervasive uncertainties about the consequences of their decisions. Uncertainties surround both the relationships between candidate policies and the resulting physical outcomes, and the proper valuation of differences in outcomes. The first type of uncertainty I denote “outcome uncertainty.” It derives from the complex physical, chemical, and biological processes that determine the effect of changes in human activities on changes in environmental conditions that may either affect human welfare directly or produce further consequences that affect welfare. The second type, “value uncertainty,” exists because many of these welfare-affecting changes are not directly traded on economic markets, so their economic valuation is not apparent, and the changes in outcomes may involve unfamiliar and unexplored areas of individuals’ preference functions.
