Economic Analysis of Global Catastrophic Risks Under Uncertainty

Wei-Chun Tseng (), Chi-Chung Chen and Tsung-Ling Hwang
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Wei-Chun Tseng: Department of Applied Economics, National Chung-Hsing University, Taichung 402, Taiwan
Chi-Chung Chen: Department of Applied Economics, National Chung-Hsing University, Taichung 402, Taiwan
Tsung-Ling Hwang: Department of Applied Economics, National Chung-Hsing University, Taichung 402, Taiwan

Risks, 2025, vol. 13, issue 12, 1-22

Abstract: Background: Despite the apparent importance of global catastrophe risks (GCRs), human society has invested relatively little to reduce them. One possible reason is that we do not understand the significance of reducing GCRs, especially when measured in the monetary terms that we typically use to make decisions. Consequently, we cannot compare them to other issues that influence our decision making and well-being. Purpose: In this study, we quantified the benefits of reducing all non-natural GCRs to highlight their importance. Method: We used a probabilistic model for simulation. Due to limited information, we introduced concepts and assumptions to aid the calculations, such as steady-state economics and sensitivity analyses. In addition, we converted expert opinions to help us focus on a narrower range of risk levels. Results: Within a considerably plausible range of the GCR, we found the following: 1. The benefits of halving the overall non-natural GCR over the next 100 years are substantial. 2. The expected human survival years are sensitive to the mitigation effort but robust to the horizon length. 3. The higher the population growth rate, the larger the expected life years saved. 4. The expected monetary benefits are positively related to the GWP per capita growth rate, mitigation period, and magnitude of natural GCRs but are negatively related to the discounting rate. Significance: The human species is actually facing multiple GCRs simultaneously. In the literature, there is still a gap in quantifying the benefits of reducing all non-natural GCRs/ERs in the coming century while accounting for the very long run on a million-year scale. This article fills such a gap, and the results may serve as a reference for global policymaking to handle this global public issue.

Keywords: global catastrophic risk (GCR); climate risk; pandemic risk; probability simulation; catastrophic risk management; AI; space colonization; anthropogenic GCR; existential risk (ER); benefits of mitigations (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
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