This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 26/01/2010 20:15:00 ← Weitzman’s “Fat Tails”: low-probability, high damages catastrophes ← Damages are a function of intensity, fraction of GDP ← 10% of damages cause 80-90% of damages ← probability weight decreases very slowly as the values get very large (so the density f(x) is substantially greater than 0 even as x approaches infinity) ← ← implication: expected value of damages x may be very large or infinite, even though the median value of x may be small ← Weitzman observes that positive feedback loops with respect to global temperatures may imply that the probability density of damages from a doubling of C02 concentration has a fat right tail. ← fat tail implies that the expected value of damages from a doubling of C02 concentration is infinite ← Society should therefore spend all of its resources to make sure that CO2 does...
View Full Document
- Fall '08
- Economics, damages catastrophes Damages, damages probability weight