On Modeling and Interpreting the Economics of Catastrophic Climate Change
AbstractWith climate change as prototype example, this paper analyzes the implications of structural uncertainty for the economics of low-probability, high-impact catastrophes. Even when updated by Bayesian learning, uncertain structural parameters induce a critical â€œtail fatteningâ€ of posterior-predictive distributions. Such fattened tails have strong implications for situations, like climate change, where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. This paper shows that the economic consequences of fat-tailed structural uncertainty (along with unsureness about high-temperature damages) can readily outweigh the effects of discounting in climate-change policy analysis.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3693423.
Date of creation: 2009
Date of revision:
Publication status: Published in Review of Economics and Statistics
Other versions of this item:
- 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.
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- Bellavance, Franois & Dionne, Georges & Lebeau, Martin, 2009.
"The value of a statistical life: A meta-analysis with a mixed effects regression model,"
Journal of Health Economics,
Elsevier, vol. 28(2), pages 444-464, March.
- François Bellavance & Georges Dionne & Martin Lebeau, 2006. "The Value of a Statistical Life: a Meta-Analysis with a Mixed Effects Regression Model," Cahiers de recherche 0646, CIRPEE.
- Richard S.J. Tol, 2000. "Is the Uncertainty about Climate Change Too Large for Expected Cost-Benefit Analysis?," Working Papers FNU-3, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2000.
- repec:ner:toulou:http://neeo.univ-tlse1.fr/2401/ is not listed on IDEAS
RePEc Biblio mentionsAs found on the RePEc Biblio, the curated bibliography for Economics:
- > Environmental and Natural Resource Economics > Climate economics
- > Environmental and Natural Resource Economics > Climate economics > Discounting, equity, uncertainty
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