Friday, October 15, 2010

The economics of climate change is mainly about decision-making under extreme uncertainty

Said M. Weitzman in reviewing the limitation of deterministic CBA approach featured in Bjørn Lomborg's newly edited book (details).

"A striking feature of the economics of climate change is that rare but catastrophic events may have unfathomable costs. Deep uncertainty about the unknown unknowns of what might go wrong is therefore coupled with essentially unlimited liability. The resulting battle between declining probabilities and increasing damages is difficult to resolve. Alas, this uncertainty can figure prominently in evaluations of climate-change policies. Its absence in a book dealing with economic comparisons of smart solutions is a serious omission."

No comments: