IDEAS home Printed from https://ideas.repec.org/a/ids/ijgrec/v3y2009i2p130-141.html
   My bibliography  Save this article

Catastrophic risks

Author

Listed:
  • Graciela Chichilnisky

Abstract

Catastrophic 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.

Suggested Citation

  • Graciela Chichilnisky, 2009. "Catastrophic risks," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 3(2), pages 130-141.
  • Handle: RePEc:ids:ijgrec:v:3:y:2009:i:2:p:130-141
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=30989
    Download Restriction: Access to full text is restricted to subscribers.

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

    Citations

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


    Cited by:

    1. Chanel, Olivier & Chichilnisky, Graciela, 2013. "Valuing life: Experimental evidence using sensitivity to rare events," Ecological Economics, Elsevier, vol. 85(C), pages 198-205.
    2. Luterbacher Urs & Sandi Carmen, 2014. "Breaking the Dynamics of Emotions and Fear in Conflict and Reconstruction," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(3), pages 1-44, August.
    3. 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.
    4. 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.
    5. Graciela Chichilnisky & Peter Eisenberger, 2009. "Asteroids: Assessing Catastrophic Risks," Working Papers 09-13, LAMETA, Universitiy of Montpellier, revised Nov 2009.
    6. 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 (IfW), vol. 3, pages 1-25.
    7. Chichilnisky, Graciela, 1998. "The economics of global environmental risk," MPRA Paper 8812, University Library of Munich, Germany.

    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:ids:ijgrec:v:3:y:2009:i:2:p:130-141. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmel O'Grady). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=158 .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.