Climate change uncertainty, irreversibility and the precautionary principle

This paper begins with a critique of the option value argument used by economists to explain and justify the precautionary principle. The argument is shown to misrepresent both uncertainty and irreversibility. An alternative justification of the precautionary principle is discussed, under conditions of Keynesian uncertainty, and irreversibility interpreted in terms of incommensurability. Recent formal decision theories under Keynesian uncertainty are reviewed and their limitations explored, with particular reference to the insights that decision theory can bring to understanding the precautionary principle. Throughout, the decision problems under consideration are those faced by climate change policy makers.