Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management
34 Pages Posted: 12 Aug 2008
Date Written: August 12, 2008
Abstract
We analyze ecosystem management under 'unmeasurable' Knightian uncertainty or ambiguity which, given the uncertainties characterizing ecosystems, might be a more appropriate framework relative to the classic risk case (measurable uncertainty). This approach is used as a formal way of modelling the precautionary principle in the context of least favorable priors and maxmin criteria. We provide biodiversity management rules which incorporate the precautionary principle. These rules take the form of either minimum safety standards or optimal harvesting under precautionary approaches.
Keywords: Knightian uncertainty, uncertainty aversion, ambiguity aversion, risk aversion, precautionary principle, biodiversity, optimal harvesting, robust control
JEL Classification: D81, Q20
Suggested Citation: Suggested Citation
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