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From the St. Petersburg paradox to the dismal theorem

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  • Cato, Susumu

Abstract

This paper aims to consider the meaning of the dismal theorem, as presented by Martin Weitzman [(2009) On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics91, 1–19]. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates regarding the economics of climate change. In this study, we present an intuitive similarity between the dismal theorem and the St. Petersburg paradox using a simple discrete probability distribution.

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  • Cato, Susumu, 2020. "From the St. Petersburg paradox to the dismal theorem," Environment and Development Economics, Cambridge University Press, vol. 25(5), pages 423-432, October.
    • Handle: RePEc:cup:endeec:v:25:y:2020:i:5:p:423-432_1
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    Cited by:

    1. David Anthoff & Richard S. J. Tol, 2022. "Testing the Dismal Theorem," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(5), pages 885-920.

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