Cheering Up the Dismal Theorem
by Dr. Ross McKitrick
Abstract
The Weitzman (2009) Dismal Theorem suggests agents today should be
willing to pay an infinite amount to insure against fat-tailed risks
of catastrophes such as climate change. This result, however, is
sensitive to the use of ln(C) as an approximate measure of the change
in consumption. Use of an exact measure yields a less dismal
conclusion.