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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

Abstract: 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.

Date: 2015
New Economics Papers: this item is included in nep-rmg
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https://warwick.ac.uk/fac/soc/economics/research/w ... erp_1060_hammond.pdf

Related works:
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) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1060

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