IDEAS home Printed from https://ideas.repec.org/a/spr/jahrfr/v40y2020i2d10.1007_s10037-020-00140-9.html
   My bibliography  Save this article

Climate change, catastrophes and Dismal Theorem: a critical review
[Klimawandel, Katastrophen und das „Dismal Theorem“: eine kritische Überprüfung]

Author

Listed:
  • Andrea Rampa

    (Research Institute on Sustainable Economic Growth (IRCrES-CNR)
    Sustainability Environmental Economics and Dynamics Studies (SEEDS) – Research Centre)

Abstract

The aim of this paper is to provide an overview of the main studies about catastrophic scenarios and environmental policy in the presence of natural disaster risks related to climate change. We investigate how literature has analysed these topics employing extreme case scenarios modelling. Throughout this review we want to investigate how related literature has evolved in recent years and how the historical evolution of climate change issues has induced academic studies (and vice versa), and why it has become a crucial topic for regional science, not only regarding resilience analysis. We focus on two main critiques: (i) the intergenerational equity between present and future generations (Stern 2006); (ii) the time preference rate linked to intergenerational equity, from the use of fat tail and the consequent debate around the Dismal Theorem (Weitzman 2009) to the debate around the usefulness of the Expected Utility theory.

Suggested Citation

  • Andrea Rampa, 2020. "Climate change, catastrophes and Dismal Theorem: a critical review [Klimawandel, Katastrophen und das „Dismal Theorem“: eine kritische Überprüfung]," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 40(2), pages 113-136, October.
    • Handle: RePEc:spr:jahrfr:v:40:y:2020:i:2:d:10.1007_s10037-020-00140-9
    DOI: 10.1007/s10037-020-00140-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10037-020-00140-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10037-020-00140-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
    2. Lopez-Uribe, Maria del Pilar & Castells-Quintana, David & McDermott, Thomas K. J., 2017. "Geography, institutions and development: a review ofthe long-run impacts of climate change," LSE Research Online Documents on Economics 65147, London School of Economics and Political Science, LSE Library.
    3. Karp, Larry S., 2009. "Sacrifice, discounting and climate policy: five questions," CUDARE Working Papers 51612, University of California, Berkeley, Department of Agricultural and Resource Economics.
    4. Horowitz, John & Lange, Andreas, 2014. "Cost–benefit analysis under uncertainty — A note on Weitzman's dismal theorem," Energy Economics, Elsevier, vol. 42(C), pages 201-203.
    5. Karsten Rusche, 2010. "Quality of life in the regions: an exploratory spatial data analysis for West German labor markets," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 30(1), pages 1-22, February.
    6. Chanel, Olivier & Chichilnisky, Graciela, 2013. "Valuing life: Experimental evidence using sensitivity to rare events," Ecological Economics, Elsevier, vol. 85(C), pages 198-205.
    7. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801.
    8. Simon Dietz & Dennis Anderson & Nicholas Stern & Chris Taylor & Dimitri Zenghelis, 2007. "Right for the Right Reasons," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 8(2), pages 229-258, April.
    9. Ackerman, Frank & Stanton, Elizabeth A. & Hope, Chris & Alberth, Stephane, 2009. "Did the Stern Review underestimate US and global climate damages?," Energy Policy, Elsevier, vol. 37(7), pages 2717-2721, July.
    10. William D. Nordhaus & Joseph G. Boyer, 1999. "Requiem for Kyoto: An Economic Analysis of the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 93-130.
    11. McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. "Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
    12. Kenneth J. Arrow, 1974. "The Use of Unbounded Utility Functions in Expected-Utility Maximization: Response," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 136-138.
    13. Antony Millner, 2013. "On Welfare Frameworks and Catastrophic Climate Risks," CESifo Working Paper Series 4442, CESifo.
    14. Millner, Antony, 2013. "On welfare frameworks and catastrophic climate risks," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 310-325.
    15. Frederick Ploeg & Aart Zeeuw, 2019. "Pricing Carbon and Adjusting Capital to Fend Off Climate Catastrophes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 29-50, January.
    16. 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.
    17. Klaas Fröhlich & Robert Hassink, 2018. "Regional resilience: a stretched concept?," European Planning Studies, Taylor & Francis Journals, vol. 26(9), pages 1763-1778, September.
    18. Geoffrey Heal, 2009. "Climate Economics: A Meta-Review and Some Suggestions for Future Research," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 4-21, Winter.
    19. Nordhaus, William D, 1993. "Optimal Greenhouse-Gas Reductions and Tax Policy in the "Dice" Model," American Economic Review, American Economic Association, vol. 83(2), pages 313-317, May.
    20. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
    21. Kenneth Arrow & Marcel Priebsch, 2014. "Bliss, Catastrophe, and Rational Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(4), pages 491-509, August.
    22. Plambeck, Erica L & Hope, Chris, 1996. "PAGE95 : An updated valuation of the impacts of global warming," Energy Policy, Elsevier, vol. 24(9), pages 783-793, September.
    23. Robert S. Pindyck, 2011. "Fat Tails, Thin Tails, and Climate Change Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 258-274, Summer.
    24. Kenneth Arrow, 2009. "A note on uncertainty and discounting in models of economic growth," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 87-94, April.
    25. Peter A.G. Bergeijk & Steven Brakman & Charles Marrewijk, 2017. "Heterogeneous economic resilience and the great recession's world trade collapse," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 3-12, March.
    26. Stéphane Hallegatte, 2014. "Natural Disasters and Climate Change," Springer Books, Springer, edition 127, number 978-3-319-08933-1, December.
    27. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    28. William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
    29. Martin L. Weitzman, 2011. "Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 275-292, Summer.
    30. Ikefuji, Masako & Laeven, Roger J.A. & Magnus, Jan R. & Muris, Chris, 2015. "Expected utility and catastrophic consumption risk," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 306-312.
    31. Martin L. Weitzman, 2013. "Tail-Hedge Discounting and the Social Cost of Carbon," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 873-882, September.
    32. William D. Nordhaus, 2011. "The Economics of Tail Events with an Application to Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 240-257, Summer.
    33. Richard S. J. Tol & Gary W. Yohe, 2006. "A Review of the Stern Review," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(4), pages 233-250, October.
    34. Franziska Pudelko & Christian Hundt & Linus Holtermann, 2018. "Gauging two sides of regional economic resilience in Western Germany—Why sensitivity and recovery should not be lumped together," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 38(2), pages 141-189, October.
    35. Karp, Larry S., 2009. "Sacrifice, discounting and climate policy : five questions," CUDARE Working Paper Series 1086, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
    36. Edward A. Parson, 2007. "The Big One: A Review of Richard Posner's Catastrophe: Risk and Response," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 147-213, March.
    37. Barrett, Scott, 2013. "Climate treaties and approaching catastrophes," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 235-250.
    38. Daniele Bondonio & Robert T. Greenbaum, 2018. "Natural disasters and relief assistance: Empirical evidence on the resilience of U.S. counties using dynamic propensity score matching," Journal of Regional Science, Wiley Blackwell, vol. 58(3), pages 659-680, June.
    39. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    40. Nicholas Stern, 2013. "The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 838-859, September.
    41. Chichilnisky, Graciela, 2009. "The topology of fear," Journal of Mathematical Economics, Elsevier, vol. 45(12), pages 807-816, December.
    42. Alessandra Faggian & Roberta Gemmiti & Timothy Jaquet & Isabella Santini, 2018. "Regional economic resilience: the experience of the Italian local labor systems," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 60(2), pages 393-410, March.
    43. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    44. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    45. Alberth, Stephan & Hope, Chris, 2007. "Climate modelling with endogenous technical change: Stochastic learning and optimal greenhouse gas abatement in the PAGE2002 model," Energy Policy, Elsevier, vol. 35(3), pages 1795-1807, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. César Andrés Mendoza & Giulio Breglia & Benjamín Jara, 2020. "Regional labor markets after an earthquake. Short-term emergency reactions in a cross-country perspective. Cases from Chile, Ecuador, Italy [Regionale Arbeitsmärkte nach einem Erdbeben. Kurzfristig," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 40(2), pages 189-221, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hwang, In Chang & Tol, Richard S.J. & Hofkes, Marjan W., 2016. "Fat-tailed risk about climate change and climate policy," Energy Policy, Elsevier, vol. 89(C), pages 25-35.
    2. Richard S J Tol, 2018. "The Economic Impacts of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 4-25.
    3. Millner, Antony, 2013. "On welfare frameworks and catastrophic climate risks," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 310-325.
    4. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    5. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    6. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    7. Antony Millner, 2013. "On Welfare Frameworks and Catastrophic Climate Risks," CESifo Working Paper Series 4442, CESifo.
    8. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
    9. Kelly, David L. & Tan, Zhuo, 2015. "Learning and climate feedbacks: Optimal climate insurance and fat tails," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 98-122.
    10. Ikefuji, Masako & Laeven, Roger J.A. & Magnus, Jan R. & Muris, Chris, 2015. "Expected utility and catastrophic consumption risk," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 306-312.
    11. Chambers, Robert G. & Melkonyan, Tigran, 2017. "Ambiguity, reasoned determination, and climate-change policy," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 74-92.
    12. Buchholz, Wolfgang & Schymura, Michael, 2012. "Expected utility theory and the tyranny of catastrophic risks," Ecological Economics, Elsevier, vol. 77(C), pages 234-239.
    13. Fisher, Anthony, 2014. "Climate Science and Climate Economics," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt746627gz, Department of Agricultural & Resource Economics, UC Berkeley.
    14. Matthew Adler & Nicolas Treich, 2015. "Prioritarianism and Climate Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 279-308, October.
    15. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    16. In Chang Hwang, 2016. "Active learning and optimal climate policy," EcoMod2016 9611, EcoMod.
    17. Pycroft, Jonathan & Vergano, Lucia & Hope, Chris & Paci, Daniele & Ciscar, Juan Carlos, 2011. "A tale of tails: Uncertainty and the social cost of carbon dioxide," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-29.
    18. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, beyond utilitarianism," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-52.
    19. Sussman Fran & Weaver Christopher P. & Grambsch Anne, 2014. "Challenges in applying the paradigm of welfare economics to climate change," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(3), pages 347-376, December.
    20. David Anthoff & Richard Tol, 2009. "The Impact of Climate Change on the Balanced Growth Equivalent: An Application of FUND," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 351-367, July.

    More about this item

    Keywords

    Catastrophe; Uncertainty; Environmental policy; Risk; Natural disaster;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jahrfr:v:40:y:2020:i:2:d:10.1007_s10037-020-00140-9. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.