The analytics of the decsion are pretty simple, once you model the uncertainty.
| | Take action | Don’t take action |
| Global warming is real (p) | 0 | p*(Error Cost II) |
| Global warming is not real (1-p) | (1-p)*(Error Cost I) | 0 |
To minimize expected error costs, take action if and only if
(1-p)*(Error Cost I) < p*(Error Cost II). Most of the policy debate concerns the probability that Global warming will occur, p, and the size of the Error Costs. Since the costs of taking action are incurred in the present; and the costs of inaction are incurred only in the future, benefit-cost analysis requires a discount rate. A small discount rate favors action. A big discount rate favors inaction.
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