Larry Karp, Berkeley
Department seminar. Larry Karp is a Professor at University of California, Berkeley. He will present a paper entitled "Sober optimism and the formation of international environmental agreements", co-authored by Hiroaki Sakamoto.
We analyze a dynamic model of international environmental agreements (IEAs) where countries cannot make long-term commitments or use sanctions or rewards to induce cooperation. Countries can communicate with each other to build endogenous beliefs about the random consequences of (re)opening negotiation. If countries are patient, an effective agreement can be reached after a succession of short-lived ineffective agreements. This eventual success requires \sober optimism": the understanding that cooperation is possible but not easy to achieve. Negotiations matter because beliefs are important. Our results help explain heterogeneous outcomes and also provide a counterweight to prevailing pessimistic views about the prospects for IEAs. An empirical application illustrates the importance of sober optimism and it shows how a reduction in the fragmentation of the global polity makes it easier to coordinate on beliefs that support a good equilibrium.
Host: Christian Traeger