There are many reasons to suspect that benefit-cost analysis applied to environmental policies will result in policy decisions that will reject those environmental policies. The important question, of course, is whether those rejections are based on proper science. The present paper explores...

The paper derives the optimal carbon tax in closed-form from an integrated assessment of climate change. The formula shows how carbon, temperature, and economic dynamics quantify the optimal mitigation effort. The model's descriptive power is comparable to numeric models used in policy advising....

Recent theoretical work in the economics of climate change has suggested that climate policy is highly sensitive to "fat-tailed" risks of catastrophic outcomes (Weitzman, 2009b). Such risks are suggested to be an inevitable consequence of scientific uncertainty about the effects of increased...

Most decisions concerning (self-)insurance and self-protection have to be taken in situations in which a) the effort exerted precedes the moment uncertainty realises, and b) the probabilities of future states of the world are not perfectly known. By integrating these two characteristics in a...

We develop a general equilibrium model in which heterogeneous entrepreneurs produce output in the presence of financing constraints. We model granular uncertainty as the shocks that affect the uncertainty in future idiosyncratic productivity without changing the cross-sectional dispersion of...

Most risk mitigation activities involve technological uncertainty (TU) because their effectiveness depends on exogenous factors beyond the decision-maker's control or due to the decision-maker's incomplete knowledge about the associated benefits. We provide a systematic assessment of the effects...

This paper makes explicit the role of the entrepreneur in a consumer producer economy. Entrepreneurial behavior changes the status quo by altering existing comparative advantages. A positive feedback effect with trading institutions ensues. This model shows how the entrepreneur can, when...

This paper aims to consider the meaning of the dismal theorem, as is presented by Professor Martin Weitzman. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates on the...

Most decisions concerning (self-)insurance and self-protection have to be taken in situations in which a) the effort exerted precedes the moment uncertainty realises, and b) the probabilities of future states of the world are not perfectly known. By integrating these two characteristics in a...