Catastrophic Risk

7 Pages Posted: 9 Apr 2009

Date Written: 2002

Abstract

Global environmental risks such as climate change and rising sea levels are low-probability events with widespread and possibly irreversible consequences. These are fundamentally new risks which are not well understood. Learning through experimentation is out of the question because these risks are effectively irreversible in a time-scale that matters. As a result, classical theories that rely on expected utility (see Utility theory) may not work well because they underestimate low-probability events, as discussed below. The need to make global environmental decisions calls tor a systematic analysis of choices involving low-probability events with major irreversible consequences. The topic is of current importance but has been neglected in the literature of choice under uncertainty.

Suggested Citation

Chichilnisky, Graciela, Catastrophic Risk (2002). Available at SSRN: https://ssrn.com/abstract=1375632 or http://dx.doi.org/10.2139/ssrn.1375632

Graciela Chichilnisky (Contact Author)

Columbia University ( email )

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