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CatastropheRisk and Response$
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Richard A. Posner

Print publication date: 2004

Print ISBN-13: 9780195178135

Published to Oxford Scholarship Online: November 2020

DOI: 10.1093/oso/9780195178135.001.0001

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How to evaluate the catastrophic risks and the possible responses to them

How to evaluate the catastrophic risks and the possible responses to them

3 How to evaluate the catastrophic risks and the possible responses to them

Richard A. Posner

Oxford University Press

To deal in a systematic way with the catastrophic risks identified in chapter 1 requires first assessing them and then devising and implementing sensible responses. Assessment involves first of all collecting the technical data necessary to gauge, so far as that may be possible, the probability of particular risks, the purely physical consequences if the risks materialize (questions of value are for later), and the feasibility of various measures for reducing either the risks or the magnitude of the consequences by various amounts. The next step in the assessment stage is to embed the data in a cost-benefit analysis of the alternative responses to the risk. I am not proposing that cost-benefit analysis, at least as it is understood by economists, should be the decision procedure for responding to the catastrophic risks. But it is an indispensable step in rational decision making in this as in other areas of government regulation. Effective responses to most catastrophic risks are likely to be extremely costly, and it would be mad to adopt such responses without an effort to estimate the costs and benefits. No government is going to deploy a system of surveillance and attack for preventing asteroid collisions without a sense of what the system is likely to cost and what the expected benefits (roughly, the costs of asteroid collisions that the system would prevent multiplied by the probabilities of such collisions) are likely to be relative to the costs and benefits both of alternative systems and of doing nothing. The “precautionary principle” (“better safe than sorry”) popular in Europe and among Greens generally is not a satisfactory alternative to cost-benefit analysis, if only because of its sponginess—if it is an alternative at all. In its more tempered versions, the principle is indistinguishable from cost-benefit analysis with risk aversion assumed. Risk aversion, as we know, entails that extra weight be given the downside of uncertain prospects. In effect it magnifies certain costs, but it does not thereby overthrow cost-benefit analysis, as some advocates of the precautionary principle may believe.

Keywords:   Asteroid collisions, Biodiversity loss, Carbon sequestration, Endangered Species Act, Fermilab, Global warming, Imagination cost, Kyoto Protocol, Large Hadron Collider

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