Economics of the End of the World

John Kay on economics of the end of the world;

Last week was the 100th anniversary of the Tunguska explosion in Siberia. If you weren’t celebrating, you should have been. The incident was probably the nearest we have come to extinction in modern human history – and we survived.

A large object – presumably an asteroid or meteorite – collided with the Earth. If it had landed in Manhattan, it would have destroyed New York. A bit bigger, and it would have been calamitous wherever it landed. A similar event at Yucatan, 65m years ago, wiped out the dinosaurs and most other species. It would have wiped us out too had we been there. We survived Tunguska because the impact was not too large....

Martin Rees, who engages with a litany of catastrophes, gave his book the provocative title of Our Final Century? But while technology causes many problems, it also fixes many. The Black Death was probably bubonic plague and if so we could now cure it. Even the asteroid can be deflected if we see it coming.

It is difficult to think about these issues in a dispassionate way. In his book Catastrophes, Richard Posner – an American legal scholar who loves economics more than most economists – proposes a cost/benefit analysis of all possible disasters. But the attempts to model the end of the world are mostly bogus. We have good data on frequencies of near-Earth objects but there is no meaningful way to attach probabilities to these other calamities.

The best way of dealing with grave uncertainties, as with more banal disasters, is to buy options against them. For each potential catastrophe, we should undertake research to ascertain what we might do if a remote possibility becomes a plausible reality. Instead, we talk endlessly about less dangerous issues that give more scope for moral and political posturing. Speeches about man-made environmental damage and terrorism arouse audiences, but asteroids and grey goo elicit only a chuckle. Our actions against more catastrophic threats are few, ineffectual and sometimes counterproductive.

In the meantime, mark February 1 2019 and April 13 2029 in your diaries. These are the next dates on which a very large object from space may land on your head.