Efficiency and Fairness

This lecture discusses the concept of negotiation, specifically among the largest emitting parties of the UN Framework Convention on Climate Change. What is the nature of bargaining, the problems, the challenges, the obstacles, and the right way to reach a cooperative agreement? Professor Sachs introduces economics style diagrams to discuss two crucial concepts of negotiation, efficiency and fairness, and makes use of many examples to highlight the differences. Professor Sachs discusses using graphs of cost and benefit schedules to find social optimum, equilibrium points, marginal benefits, social costs, and Pareto improvements. It is harder to imagine negotiations among 193 countries, so Professor Sachs pares down the thought experiment to just two negotiating countries and carries out a sample negotiation. The bottom line is that because climate change is a disaster for the entire world, there is a net benefit for the entire world to mitigation, and economic gains will be shared among countries, which should motivate negotiations. Efficient mitigation is the way of reducing emissions at least cost for the world as a whole, and the fair way to do so is to share the cost appropriately. This video is part of the module The Main Challenges of Climate Change Negotiations.