Abstract
Catastrophes can profitably be thought of as economic events. This essay begins by considering the consumption of catastrophes, stressing the way that we disseminate information about them, and respond, possibly on a nonrational basis. Catastrophes are produced through a combination of actions by nature and humans. Due to inappropriate incentives, human actions often exacerbate outcomes. This is particularly true in “micromotive” situations, such as the AIDS epidemic, where actions by many players produce a collectively bad outcome. Mechanisms to prevent or ameliorate catastrophes—liability, insurance, and government regulation—are considered.
Article PDF
Similar content being viewed by others
References
Breyer, Stephen G. (1993).Breaking the Vicious Circle: Toward Effective Risk Regulation. Cambridge, MA: Harvard University Press.
Fischhoff, Baruch et al. (1981).Acceptable Risk. New York: Cambridge University Press.
Hamilton, James T., and W. Kip, Viscusi. (1994). “Human Health Risk Assessments for Superfund,”Ecology Law Quarterly 21(3), 573–641.
Interagency Floodplain Management Review Committee. (1994). “Sharing the Challenge: Floodplain Management into the 21 st Century.” Washington, D.C., June.
Jobe, Edward B. (1994). “Managing Hurricane Exposure.” Paper for Stanford University Conference on Social Policy Toward Catastrophic Risk, October 21–22.
Kahneman, Daniel, Paul, Slovic, and Amos, Tversky, eds. (1982).Judgment Under Uncertainty: Heuristics and Biases. New York: Cambridge University Press.
Kahneman, Daniel, and Amos, Tversky. (1979). “Prospect Theory: An Analysis of Decision under Risk,”Econometrica 47, 263–291.
Kakalik, J.S., and N.M., Pace. (1986).Costs and Compensation Paid in Tort Litigation. R-3391-ICJ. Santa Monica, CA: Rand Institute for Civil Justice.
Kunreuther, Howard et al. (1978).Disaster Insurance Protection: Public Policy Lessons. New York: Wiley.
Kunreuther, Howard. (1996). “Mitigating Disaster Losses Through Insurance,”Journal of Risk and Uncertainty 12.
Los Angeles Times, September 9, 1994.
New York Times, June 18, 1991, p. B5.
New York Times, January 19, 1995, p. A11.
Philipson, Tomas, and Richard, Posner, (1993).Private Choices and Public Health. Cambridge, MA: Harvard University Press.
Pratt, John, and Richard, Zeckhauser. (1985).Principals and Agents: The Structure of Business. Boston, MA: Harvard Business School Press.
Preston, Richard. (1994).The Hot Zone. New York: Random House.
Renn, Ortwin et al. (1992). “The Social Amplification of Risk: Theoretical Foundations and Empirical Applications,”Journal of Social Issues 48(4), 137–161.
Schelling, Thomas. (1978).Micromotives and Macrobehavior. New York: Norton and Co.
Shah, Haresh. (1994). As quoted in theNew York Times, September 20, p. C9.
Sinfied, Nick. (1994). “Asbestos—Human or Natural Disaster.”
U.S. Environmental Protection Agency, Office of Air and Radiation. (1988). “Regulatory Impact Analysis of NAAQS for Sulfur Oxide (Sulfur Dioxide).” Draft Report.
Viscusi, W. Kip. (1996). “Alternative Institutional Responses to Asbestos,”Journal of Risk and Uncertainty 12.Wall Street Journal, November 7, 1989, p. A3.
Weiler, Paul C. et al. (1993).A Measure of Malpractice: Medical Injury, Malpractice Litigation, and Patient Compensation. Cambridge, MA: Harvard University Press.
Zeckhauser, Richard, and W. Kip, Viscusi. (1990) “Risk Within Reason,”Science 248, 559–564.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Zeckhauser, R. The economics of catastrophes. J Risk Uncertainty 12, 113–140 (1996). https://doi.org/10.1007/BF00055789
Issue Date:
DOI: https://doi.org/10.1007/BF00055789