Structural Uncertainty and the Value of Statistical Life in the Economics of Catastrophic Climate Change. Weitzman, M. National Bureau of Economic Research Working Papers, 2007. ![Structural Uncertainty and the Value of Statistical Life in the Economics of Catastrophic Climate Change [link]](https://bibbase.org/img/filetypes/link.svg "link")
Paper abstract bibtex Using climate change as a prototype motivating example, this paper analyzes the implications of structural uncertainty for the economics of low-probability high-impact catastrophes. The paper shows that having an uncertain multiplicative parameter, which scales or amplifies exogenous shocks and is updated by Bayesian learning, induces a critical "tail fattening" of posterior-predictive distributions. These fattened tails can have strong implications for situations (like climate change) where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. The essence of the problem is the difficulty of learning extreme-impact tail behavior from finite data alone. At least potentially, the influence on cost-benefit analysis of fat-tailed uncertainty about the scale of damages – coupled with a high value of statistical life – can outweigh the influence of discounting or anything else.
@article{weitzman_structural_2007,
series = {{NBER} {Working} {Paper} {No}. {W13490}},
title = {Structural {Uncertainty} and the {Value} of {Statistical} {Life} in the {Economics} of {Catastrophic} {Climate} {Change}},
url = {http://www.nber.org/papers/w13490},
abstract = {Using climate change as a prototype motivating example, this paper analyzes the implications of structural uncertainty for the economics of low-probability high-impact catastrophes. The paper shows that having an uncertain multiplicative parameter, which scales or amplifies exogenous shocks and is updated by Bayesian learning, induces a critical "tail fattening" of posterior-predictive distributions. These fattened tails can have strong implications for situations (like climate change) where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. The essence of the problem is the difficulty of learning extreme-impact tail behavior from finite data alone. At least potentially, the influence on cost-benefit analysis of fat-tailed uncertainty about the scale of damages -- coupled with a high value of statistical life -- can outweigh the influence of discounting or anything else.},
number = {13490},
journal = {National Bureau of Economic Research Working Papers},
author = {Weitzman, M.},
year = {2007},
keywords = {GA, Untagged},
}
Downloads: 0
{"_id":"zMyYy7SRhuMPkn8he","bibbaseid":"weitzman-structuraluncertaintyandthevalueofstatisticallifeintheeconomicsofcatastrophicclimatechange-2007","author_short":["Weitzman, M."],"bibdata":{"bibtype":"article","type":"article","series":"NBER Working Paper No. W13490","title":"Structural Uncertainty and the Value of Statistical Life in the Economics of Catastrophic Climate Change","url":"http://www.nber.org/papers/w13490","abstract":"Using climate change as a prototype motivating example, this paper analyzes the implications of structural uncertainty for the economics of low-probability high-impact catastrophes. The paper shows that having an uncertain multiplicative parameter, which scales or amplifies exogenous shocks and is updated by Bayesian learning, induces a critical \"tail fattening\" of posterior-predictive distributions. These fattened tails can have strong implications for situations (like climate change) where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. The essence of the problem is the difficulty of learning extreme-impact tail behavior from finite data alone. At least potentially, the influence on cost-benefit analysis of fat-tailed uncertainty about the scale of damages – coupled with a high value of statistical life – can outweigh the influence of discounting or anything else.","number":"13490","journal":"National Bureau of Economic Research Working Papers","author":[{"propositions":[],"lastnames":["Weitzman"],"firstnames":["M."],"suffixes":[]}],"year":"2007","keywords":"GA, Untagged","bibtex":"@article{weitzman_structural_2007,\n\tseries = {{NBER} {Working} {Paper} {No}. {W13490}},\n\ttitle = {Structural {Uncertainty} and the {Value} of {Statistical} {Life} in the {Economics} of {Catastrophic} {Climate} {Change}},\n\turl = {http://www.nber.org/papers/w13490},\n\tabstract = {Using climate change as a prototype motivating example, this paper analyzes the implications of structural uncertainty for the economics of low-probability high-impact catastrophes. The paper shows that having an uncertain multiplicative parameter, which scales or amplifies exogenous shocks and is updated by Bayesian learning, induces a critical \"tail fattening\" of posterior-predictive distributions. These fattened tails can have strong implications for situations (like climate change) where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages. The essence of the problem is the difficulty of learning extreme-impact tail behavior from finite data alone. At least potentially, the influence on cost-benefit analysis of fat-tailed uncertainty about the scale of damages -- coupled with a high value of statistical life -- can outweigh the influence of discounting or anything else.},\n\tnumber = {13490},\n\tjournal = {National Bureau of Economic Research Working Papers},\n\tauthor = {Weitzman, M.},\n\tyear = {2007},\n\tkeywords = {GA, Untagged},\n}\n\n","author_short":["Weitzman, M."],"key":"weitzman_structural_2007","id":"weitzman_structural_2007","bibbaseid":"weitzman-structuraluncertaintyandthevalueofstatisticallifeintheeconomicsofcatastrophicclimatechange-2007","role":"author","urls":{"Paper":"http://www.nber.org/papers/w13490"},"keyword":["GA","Untagged"],"metadata":{"authorlinks":{}}},"bibtype":"article","biburl":"http://bibbase.org/zotero-group/ajello/2099979","dataSources":["EndJaSpcpPJCQnJDH"],"keywords":["ga","untagged"],"search_terms":["structural","uncertainty","value","statistical","life","economics","catastrophic","climate","change","weitzman"],"title":"Structural Uncertainty and the Value of Statistical Life in the Economics of Catastrophic Climate Change","year":2007}