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Title: Averting Catastrophes: The Strange Economics of Scylla and Charybdis

Author(s): Ian Martin and Robert Pindyck

Publication Date: July 2015

Keyword(s): bioterrorism, catastrophes, catastrophic events, climate change, disasters, epidemics, nuclear terrorism, pandemics, policy objectives and willingness to pay

Programme Area(s): Public Economics

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10730

Bibliographic Reference

Martin, I and Pindyck, R. 2015. 'Averting Catastrophes: The Strange Economics of Scylla and Charybdis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10730