Trump and Paris - An Unexpected Outcome

Donald Trump's decision to pull out of the Paris agreement was a good thing, for the Paris process. Two concepts from economics and econometrics, the sunk cost fallacy and the counterfactual, can help us understand this counterintuitive impact. When comparing the outcome of the decision with the appropriate counterfactual, which acknowledges that the election of a climate change denier to the most powerful political office in the world is a sunk cost, it is hard to see how the U.S. leaving the Paris process is not a good thing for the process.

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