Friday, 11 May 2007

Sustainable Development as Insurance Premium

Interesting comment in the FT by Paul Klemperer, an Oxford economics professor:

"These outcomes may matter even if they are unlikely, just as the risk of your house being gutted by fire also matters. Even if the costs of mitigating climate change are not quite as small as the 1 per cent of GDP that the Stern Review on the Economics of Climate Change estimated, we might still be happy to pay them to prevent a small chance of catastrophe – just as most of us insure our houses even though we know the insurance companies make money from the odds they offer us. This, then, is the first question: how likely are the catastrophes against which we should be paying an “insurance premium"?

Whole article (for subsrcibers) here

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