A Precautionary Tale of Uncertain Tail Fattening

Martin Weitzman

Environmental & Resource Economics, 2013, vol. 55, issue 2, 159-173

Abstract: Suppose that there is a probability density function for how bad things might get, but that the overall rate at which this probability density function slims down to approach zero in the tail is uncertain. The paper shows how a basic precautionary principle of tail fattening could then apply. The worse is the contemplated damage, the more should a decision maker consider the bad tail to be among the relatively fatter-tailed possibilities. A rough numerical example is applied to the uncertain tail distribution of climate sensitivity. Copyright Springer Science+Business Media Dordrecht 2013

Keywords: Climate change; Fat tail; Uncertainty; Catastrophe (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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Working Paper: A Precautionary Tale of Uncertain Tail Fattening (2013)
Working Paper: A Precautionary Tale of Uncertain Tail Fattening (2012)
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DOI: 10.1007/s10640-013-9646-y

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