This paper explores how a principal with time-inconsistent preferences invests optimally in technology or capital. If the current principal prefers her future self to save more, she can increase current investments complementary to future savings and decrease investments in the strategic...

Conventional wisdom argues that environmental policy is less costly if environmental policy induces the development of cleaner technologies. In contrast to this argument, we show that the cost of environmental policy (a reduction in emissions) may be larger with induced technical change than...