Some micro/macro insights on the economics of coronavirus. Part 3: Extreme risk management
What should we be willing to sacrifice in wellbeing to collectively guard against very infrequent but extraordinarily intense events? This column asks this question in the context of France’s preparation for a pandemic, and argues that the allocation of public investments should be reviewed using scientifically based evaluation tools under uncertainty, using asset pricing theory, decision theory and real option valuation.
Humanity faces many risks that could lead to its extinction. The plague is believed to have killed up to half of the European population in the mid-14th century (O Grada 2020). The pandemics imported from Europe by the conquistadores inRead More »