Addressing Catastrophic Risks: Disparate Anatomies Require Tailored Therapies
Catastrophic risks differ in terms of their natural or human origins, their possible amplification by human behaviors, and the relationships between those who create the risks and those who suffer the losses. Given their disparate anatomies, catastrophic risks generally require tailored therapies, with each prescribed therapy employing a specific portfolio of policy strategies. Given that catastrophic risks occur rarely, and impose extreme losses, traditional mechanisms for controlling risks--bargaining, regulation, liability--often function poorly. Commons catastrophes arise when a group of actors collectively impose such risks on themselves. When the commons is balanced, that is, when the parties are roughly symmetrically situated, a range of regulatory mechanisms can perform well. However, unbalanced commons--such as exist with climate change--will challenge any control mechanism with the disparate parties putting forth proposals to limit their own burdens. When humans impose catastrophic risks predominantly on others--as with deepwater oil spills--the risks are external. For those risks, the analysis shows, a single responsible party should be identified. Primary emphasis should then be placed on a two-tier liability system. Parties engaged in activities posing such catastrophic risks would be subject to substantial minimum financial requirements, strict liability for all damages, and a risk-based tax for expected losses that would exceed the responsible party's ability to pay. Utilizing the financial incentives of this two-tier liability system would decrease the current reliance on regulatory policy, and would alter the role of regulators with a tilt toward financial oversight efforts and away from direct control. Catastrophic risks will always be with us. But as rare, extreme events, society has little experience with them, and current mechanisms are poorly designed to control them. Only a tailored therapy approach offers promise of significant improvement.
|Date of creation:||Nov 2011|
|Contact details of provider:|| Postal: 79 JFK Street, Cambridge, MA 02138|
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Viscusi, W. Kip & Zeckhauser, Richard J., 2011.
"Deterring and Compensating Oil Spill Catastrophes: The Need for Strict and Two-Tier Liability,"
Working Paper Series
rwp11-025, Harvard University, John F. Kennedy School of Government.
- Kip, Viscusi, W. & Zeckhauser, Richard Jay, 2011. "Deterring and Compensating Oil Spill Catastrophes: The Need for Strict and Two-Tier Liablility," Scholarly Articles 5027954, Harvard Kennedy School of Government.
When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp11-045. 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: ()
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.