The seminar series in Energy Economics & Finance (EEF) is jointly organized by Wharton’s Business Economics and Public Policy Department, the Kleinman Center for Energy Policy, and Wharton’s Business, Climate and Environment Lab. The scope of the seminar includes regulation and policy papers. The scope of the seminar also includes environmental and transportation issues, as long as there is a connection with energy. Sessions are biweekly on Mondays from 3:30 p.m. – 4:30 p.m.
Prediction errors often carry asymmetric costs: e.g., failing to forecast a flood that strikes causes more harm than predicting one that never comes. Amid communication costs, a social planner chooses a coarsened signal with deliberately biased predictions to align algorithms with this downstream reality. These inaccuracies introduce a tradeoff with trust in the algorithm: conservative flood-warning standards reduce costly false negatives but generate more false positives, potentially eroding faith in overall accuracy. I quantify these forces in the context of climate early warning systems. In a natural experiment, past forecast errors weaken farmers’ future input-warning responses. Using surveys I conducted on flood forecasts in Bangladesh and Sierra Leone and frost warnings in Bolivia, I find that the optimal loss function weighs false negatives twice as much as false positives. In the model, I show that when costs vary across heterogeneous consumers, any given statistical loss function generates uneven welfare loss by implicitly imposing a uniform utility tradeoff on users. Empirically,lower-income households demand systematically different predictions, in line with heterogeneous climate adaptation costs. Using these estimates, I implement welfare-weighted training objectives that embed asymmetric error costs directly in the algorithm’s loss function, and I evaluate the distributional consequences of differentially customized forecasts that better reflect a prediction’s economic implications for households.
Dev Patel is the Peggy and Henry D. Sharpe Jr. Assistant Professor of Economics and Environmental Science at Brown University. His research focuses on development and environmental economics, with a focus on climate change adaptation, gender, and education. Previously, he was a Prize Fellow in Economics, History, and Politics at the Center for History and Economics at Harvard and a Postdoctoral Fellow at J-PAL at MIT. He received his Ph.D. in economics from Harvard in 2024.