Catastrophic Risk, Rare Events, and Black Swans: Could There Be a Countably Additive Synthesis?
Peter Hammond ()
The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics
Catastrophic risk, rare events, and black swans are phenomena that require special attention in normative decision theory. Several papers by Chichilnisky integrate them into a single framework with finitely additive subjective probabilities. Some precursors include: (i) following Jones-Lee (1974), undefined willingness to pay to avoid catastrophic risk; (ii) following Rényi (1955, 1956) and many successors, rare events whose probability is infinitesimal. Also, when rationality is bounded, enlivened decision trees can represent a dynamic process involving successively unforeseen "true black swan" events. One conjectures that a different integrated framework could be developed to include these three phenomena while preserving countably additive probabilities.
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Chapter: Catastrophic Risk, Rare Events, and Black Swans: Could There Be a Countably Additive Synthesis? (2016)
Working Paper: Catastrophic Risk, Rare Events, and Black Swans: Could There Be a Countably Additive Synthesis? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1060
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