AbstractCatastrophic risks are rare events with major consequences and of great interest to green economics. The article investigates the way economics deals with catastrophic risks. Classic expected utility theory is insensitive to rare events no matter how important these may be, based on the axioms of Von Neumann (1944), Arrow (1971) and DeGroot (1970/2004) that define proximity of observations in terms of 'averages' obliterating outliers. A new axiomatic extension to the theory of choice introduced new axioms that are sensitive to rare events, and characterised the criteria that these imply (Chichilnisky, 1996, 2000, 2002, 2010; Lawuers, 1993). These are expected utility combined with a new term that focuses on extremal events, explaining 'fat tails' and 'outliers'. Continuity based on 'the topology of fear' provides the required sensitivity to rare events (Chichilnisky, 2009c). Experimental evidence for the new axiomatic treatment is in Chanel and Chichilnisky (2009). The results relate to Debreu's (1954) work on Adam Smith's Invisible Hand and Le Doux's (1996) work on the neurological responses to fear.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Inderscience Enterprises Ltd in its journal Int. J. of Green Economics.
Volume (Year): 3 (2009)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.inderscience.com/browse/index.php?journalID=158
catastrophic risks; risk; uncertainty; outliers; rare events; axioms of choice; topology; fear; green economics; extreme events; mathematical economics; statistics.;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Chanel, Olivier & Chichilnisky, Graciela, 2013.
"Valuing life: Experimental evidence using sensitivity to rare events,"
Elsevier, vol. 85(C), pages 198-205.
- Olivier Chanel & Graciela Chichilnisky, 2011. "Valuing life: experimental evidence using sensitivity to rare events," Working Papers halshs-00651163, HAL.
- Chichilnisky, Graciela, 2009.
"Avoiding extinction: equal treatment of the present and the future,"
Economics - The Open-Access, Open-Assessment E-Journal,
Kiel Institute for the World Economy, vol. 3(32), pages 1-25.
- Chichilnisky, Graciela, 2009. "Avoiding Extinction: Equal Treatment of the Present and the Future," Economics Discussion Papers 2009-8, Kiel Institute for the World Economy.
- Graciela Chichilnisky, 2009. "Avoiding Extinction: Equal Treatment of the Present and the Future," Working Papers 09-07, LAMETA, Universtiy of Montpellier, revised Aug 2009.
- Chichilnisky, Graciela, 1998. "The economics of global environmental risk," MPRA Paper 8812, University Library of Munich, Germany.
- Olivier Chanel & Graciela Chichilnisky, 2009. "The influence of fear in decisions: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 271-298, December.
- Chichilnisky, Graciela, 2000. "An axiomatic approach to choice under uncertainty with catastrophic risks," Resource and Energy Economics, Elsevier, vol. 22(3), pages 221-231, July.
- Graciela Chichilnisky & Peter Eisenberger, 2009. "Asteroids: Assessing Catastrophic Risks," Working Papers 09-13, LAMETA, Universtiy of Montpellier, revised Nov 2009.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Graham Langley).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.