Environmental Catastrophes and Mitigation Policies in a Multi-region World

A seminar on “Environmental Catastrophes and Mitigation Policies in a Multi-region World” with Professor Avinash Dixit, Professor Emeritus at Princeton University was held at NCAER on July 12, 2018.

In his Presentation, Professor Dixit discussed his joint paper with Timothy Besley (LSE) which presents a simple model for assessing the willingness to pay for reductions in the risk associated with catastrophic climate change. The model is extremely tractable and applies to a multi-region world but with global externalities and has five key features. First, neither the occurrence nor the costs of a catastrophic event in any one year are precisely predictable. Second, the probability of a catastrophe occurring in any one year increases as the levels of greenhouse gases in the atmosphere increase. Third, greenhouse gases are a worldwide public bad with emissions from any one country or region increasing the risks for all. Fourth, there is two-sided irreversibility; if nothing is done and the problem proves serious, the climate, economic activity and human life will suffer permanent damage, but if we spend large sums on countermeasures and the problem turns out to be minor or even non-existent, we will have wasted resources unnecessarily. Fifth, technological progress may yield partial or even complete solutions. The framework proposed by the authors can be used to give a sense of the quantitative significance of mitigation strategies. The paper illustrates this for a core set of parameter values.

Avinash Dixit is John J. F. Sherrerd ’52 University Professor of Economics Emeritus at Princeton University. Before joining Princeton in 1981, he was assistant professor at the University of California, Berkeley, a fellow of Balliol College, Oxford, and professor at the University of Warwick. He has held visiting professorships at MIT, and visiting scholar positions at the IMF, the LSE, the Institute for International Economic Studies in Stockholm, and the Russell Sage Foundation. Dixit’s research interests include microeconomic theory, game theory, international trade, industrial organization, growth and development theories, public economics, political economy, and the new institutional economics.

Dixit was President of the Econometric Society in 2001, and of the American Economic Association in 2008. He was elected to the American Academy of Arts and Sciences in 1992, the National Academy of Sciences in 2005, the American Philosophical Society in 2010, and was elected a Corresponding Fellow of the British Academy in 2006. He received the Indian Econometric Society’s Mahalanobis Memorial International Medal in 1985. He was awarded the Padma Vibhushan by the President of India in 2016. Dixit delivered the 15th Annual NCAER India Policy Forum Lecture 0n July 10, 2018. Dixit studied for a BSc in mathematics and physics at St. Xavier’s College Bombay, at Corpus Christi College Cambridge, for a BA in mathematics, and at the Massachusetts Institute of Technology for a PhD in economics.