Bloomberg reports:

What if climate change turns out to be worse than we think? That anxiety is now commonplace, but a decade ago it took an influential paper by a Harvard professor to convince the insular world of climate economists to focus more of their attention on worst-case scenarios.

Martin Weitzman, who passed away this week at the age of 77, forever connected the notion of “fat tails” to the economics of climate risk. Before his 2009 paper overturned standard thinking, researchers looking at greenhouse-gas pollution and subsequent warming had focused on the climate futures that are most likely to happen. This is the hallmark of traditional cost-benefit analysis: Figure out the benefits of keeping the climate stable, compare that to the costs of preventing change, and then determine which policies make the most sense.

Weitzman used technical math to make the case that climate change is different because what’s most likely to happen doesn’t matter as much when there’s a possibility of total catastrophe. “Even when you have a low probability of a highly consequential event, those consequences—when they’re of a significant enough magnitude—can really overwhelm your thinking,” said Richard Newell, chief executive of the research nonprofit Resources for the Future and a former Weitzman teaching assistant. [Continue reading…]