IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Catastrophic risks

Listed author(s):
  • Graciela Chichilnisky

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.

If 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.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

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.

Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Green Economics.

Volume (Year): 3 (2009)
Issue (Month): 2 ()
Pages: 130-141

in new window

Handle: RePEc:ids:ijgrec:v:3:y:2009:i:2:p:130-141
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

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: (Darren Simpson)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.