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My criticism of Stern Report's conclusions - and I am not alone in it - is based on serious economic arguments, not on aprioristic statements.

The discount rate is an aprioristic statement about the future. Stern makes an aprioristic statement, and so does Klaus. It's anybody's guess whose guess is correct.

Klaus chooses to concentrate on the discount rate and ignores the value at risk, which has a lot to do with the uncertainty in the estimation of the appropriate discount rate.

Underestimating the discount rate is like taking the lower end of a confidence interval, which is the proper thing to do when calculating value at risk.

Can the last politician to go out the revolving door please turn the lights off?

by Carrie (migeru at eurotrib dot com) on Fri Jun 22nd, 2007 at 05:14:54 AM EST
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