The economics of catastrophe

Here is a critical review of the new Richard Posner book, Catastrophe: Risk and Response.  Money quote:

…differences in risk perception can only be resolved through political negotiation.  But democratic politics is an enterprise for which Posner has contempt. He is addicted to the rule of experts, and he proposes a series of arid and (for a self-styled pragmatist) surprisingly impractical policy solutions for applying cost benefit analysis to risk calculation: a "science court" of experts that would review dangerous government  research projects; the creation of an international environmental protection agency to enforce a modified Kyoto Protocol under the auspices of the United Nations; a federal review board that would forbid any scientific research that poses an "undue risk" to human survival. Few of these proposals have any realistic chance of being adopted in America. And even if they were adopted, public emotionalism would continue to demand irrational (or as the behavioral psychologists say, "quasi-rational") allocations of resources that would thwart the experts’ recommendations. Although Posner promises to monetize the costs of these psychological and political impediments, he fails to do so.

I’m just reading the book now, but in general I am more sympathetic to the view that we underinvest in protection against large catastrophes; read Alex on this one.


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