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Averting Catastrophes: The Strange Economics of Scylla and Charybdis

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  • Martin, Ian
  • Pindyck, Robert

Abstract

Faced with numerous potential catastrophes---nuclear and bioterrorism, mega-viruses, climate change, and others---which should society attempt to avert? A policy to avert one catastrophe considered in isolation might be evaluated in cost-benefit terms. But because society faces multiple catastrophes, simple cost-benefit analysis fails: Even if the benefit of averting each one exceeds the cost, we should not necessarily avert them all. We explore the policy interdependence of catastrophic events, and develop a rule for determining which catastrophes should be averted and which should not.

Suggested Citation

  • Martin, Ian & Pindyck, Robert, 2015. "Averting Catastrophes: The Strange Economics of Scylla and Charybdis," CEPR Discussion Papers 10730, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10730
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    More about this item

    Keywords

    bioterrorism; catastrophes; catastrophic events; climate change; disasters; epidemics; nuclear terrorism; pandemics; policy objectives; willingness to pay;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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