Recent Developments in the Intertemporal Modeling of Uncertainty

Time and uncertainty constitute essential ingredients to many of the most challenging resource problems. With respect to the time dimension, agents are generally assumed to have a pure time preference as well as a preference for smoothing consumption over time. With respect to risk, agents are generally assumed to be Arrow-Pratt risk averse. The discounted expected utility model assumes that aversion to risk and aversion to intertemporal fluctuations coincide. This review discusses models and concepts that aim at disentangling time and risk attitude and briefly sketches a generalization of risk attitude to situations where uncertainty is not captured by unique probability measures. This paper reviews resource economic applications and relates the concepts to the debate on the social discount rate.