Averting Catastrophes: The Strange Economics of Scylla and Charybdis
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Pindyck_The strange economics.pdf
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4.13 MB
Format
Adobe PDF
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Author(s)
Martin, Ian W. R.
Pindyck, Robert S
Date Issued
October 2015
Journal
American Economic Review
Publisher
American Economic Association
Citation
Martin, Ian W. R. and Pindyck, Robert S. “Averting Catastrophes: The Strange Economics of Scylla and Charybdis.” American Economic Review 105, no. 10 (October 2015): 2947–2985. © 2015 American Economic Association
Version
Final published version
Abstract
Faced with numerous potential catastrophes--nuclear and bioterrorism, mega-viruses, 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. (JEL D61, Q51, Q54)
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
http://dx.doi.org/10.1257/aer.20140806
