The End of Doom and Cost-Benefit Methodology, Bryan Caplan | EconLog | Library of Economics and Liberty:
'via Blog this'
Weitzman contends that the uncertainties surrounding future man-made climate change are so great that there is some nonzero probability that total catastrophe will strike. Weitzman focuses on equilibrium climate sensitivity... As has been discussed, the IPCC Physical Science report finds that climate sensitivity is likely to be in the range of 1.5° to 4.5° C and very unlikely to be greater than 6°C. But very unlikely is not impossible.
Weitzman spins out scenarios in which there could be a 5 percent chance that global average temperature rises by 10°C (17° F) by 2200 and a 1 percent chance that it rises by 20°C (34°F)... Surely people should just throw out cost-benefit analysis and pay the necessary trillions to avert this dire possibility, right?
Then again, perhaps Weitzman is premature in declaring the death of cost-benefit analysis. William Nordhaus certainly thinks so, and he has written a persuasive critique of Weitzman's dismal conclusions... Weitzman's Dismal Theorem implies that the world would be willing to spend $10 trillion to prevent a one-in-100-billion chance of being hit by an asteroid...
Nordhaus also notes that catastrophic climate change is not the only thing we might worry about. Other low-probability civilization-destroying risks include "biotechnology, strangelets, runaway computer systems, nuclear proliferation, rogue weeds and bugs, nanotechnology, emerging tropical diseases, alien invaders, asteroids, enslavement by advanced robots, and so on."
Why has no one ever applied a Dismal Theorem analysis to evaluate the nonzero probability that bad government policy will cause a civilization-wrecking catastrophe?