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Averting catastrophes: the strange economics of Scylla and Charybdis

Martin, Ian and Pindyck, R. S. (2015) Averting catastrophes: the strange economics of Scylla and Charybdis. American Economic Review, 105 (10). pp. 2947-2985. ISSN 0002-8282

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Abstract

Faced with numerous potential catastrophes—nuclear and bioterrorism, megaviruses, climate change, and others—which should society attempt to avert? A policy to avert one catastrophe considered in isolation might be evaluated in cost-benefit terms. But because society faces multiple catastrophes, simple cost-benefit analysis fails: Even if the benefit of averting each one exceeds the cost, we should not necessarily avert them all. We explore the policy interdependence of catastrophic events, and develop a rule for determining which catastrophes should be averted and which should not.

Item Type: Article
Official URL: https://www.aeaweb.org/aer/index.php
Additional Information: © 2015 American Economic Association
Divisions: Finance
Subjects: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Sets: Departments > Finance
Collections > Economists Online
Date Deposited: 29 May 2015 11:02
Last Modified: 20 Sep 2019 02:00
Funders: European Research Council Starting Grant 639744
URI: http://eprints.lse.ac.uk/id/eprint/62139

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