Averting catastrophes: the strange economics of Scylla and Charybdis

Martin, Ian ORCID: 0000-0001-8373-5317 and Pindyck, R. S. (2015) Averting catastrophes: the strange economics of Scylla and Charybdis. American Economic Review, 105 (10). 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
Date Deposited:	29 May 2015 11:02
Last Modified:	01 Oct 2024 03:42
Funders:	European Research Council Starting Grant 639744
URI:	http://eprints.lse.ac.uk/id/eprint/62139

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