Apocalypse Next: The Economics of Global Catastrophic Risks



Energy and Environment
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The popular mind today is haunted by the images of apocalypse; narratives of catastrophe and post-apocalyptic survival are prominent features of popular fiction, and television has seen several successful series with those themes, such as Walking Dead and Revolution. A thriving ‘prepper’ subculture of people is getting ready for an anticipated collapse of civilisation. Fears and anticipations of this kind are not found only in science fiction, technothriller novels or television and film, though. In the last two decades, a galaxy of stars of science and technology, from a former
President of the Royal Society Sir Martin Rees to the late Stephen Hawking, have warned of the growing chances of a disaster that could destroy civilisation all over the world or even bring about human extinction.1 Latterly, some politicians have taken up this theme, and not all of them do so from a ‘green’ position. They are joined by a growing number of important figures from the world of business, such as Bill Gates (2021).

Recently, everyone has had a taste of the kind of global disaster they had previously experienced only vicariously in fictional books and television shows. The Covid-19 pandemic led to a global crisis that certainly counts as a disaster, in terms of the economic impact and lives lost, and one that massively disrupted everyday life for billions of people. More significantly, it affected the patterns and workings of world civilisation in a number of destructive ways. The sobering reflection is that this could easily have been much worse – instead of thinking about how we have experienced a disaster (true though that is), we should recognise that we have dodged a bullet or had a serious warning.

All of these dangers – real and imagined – are about the same matter: global catastrophic risks (GCRs). A GCR is a possible event that will have a global impact which is utterly disastrous and long-lasting (Schneier 2015). A simple way of understanding GCR is that, as in the fictional portrayals, we are talking about a truly world-changing event. It might destroy civilisation and usher in a new, possibly permanent, dark age. or it might dramatically reduce global human populations, maybe even to the point of human extinction. As we shall see, there are many such dangers.

The idea of such a disaster is an old one, going back to the deluge narratives of the Bible and many other mythological traditions (Carlin 2019). In the genre of science fiction, stories about such topics can be found from the early nineteenth century onwards, and it has often been a device of speculative fiction (Wagar 1982). There has also been a long tradition of authors of non-fictional jeremiads arguing that if certain trends are allowed to continue, the result will be the end of everything. The many followers of Thomas Malthus over the last two hundred years are an example of this (although not Malthus himself, as he was not making a prophecy).

There is something novel, though, about the last two decades or so. Concerns expressed today are not tropes of fiction or arguments of the ‘if this goes on’ variety (although we have plenty of those still). Rather, they are well-informed concerns of a GCR happening in the foreseeable future (Bostrom and Cirkovic 2012). As we shall see, the mathematics suggest that in many cases such possible events are bound to happen sooner or later, the only question is when.

This partly reflects social and technological change. Developments in the media have made people more aware of disasters happening in other parts of the world, while simultaneously making it easier for ideas and concerns about possible GCRs to spread more easily. In addition, as more people move out of subsistence living and become wealthier, so they have more time to worry about other issues, including ones that might previously not have been worth worrying about.

But there are also objective reasons for increased concern, which reflect scientific investigation. First, the range of possible GCRs has increased. The reason for this is simple: previously, the main GCRs were natural phenomena of various kinds, many of them with low inherent probability. Increasingly, there is serious concern about GCRs that arise as a product of human activity. In particular, current technological developments, combined with the way the modern social and economic infrastructure has developed, raise a number of dangers. This means there are now new threats, produced by new technology and social development (Moynihan 2020).

The second reason for increased anxiety is the realisation that the mathematics of GCRs has frequently been misunderstood. In simple language, the chances of certain GCRs happening are higher than previously thought and probably increasing. Furthermore, a GCR only needs to happen once for there to be a disaster, and perhaps for human history to come to the proverbial full stop.

This point about probability should matter to everyone, not just mathematicians. Evidence is clear that the way policymakers think about risk in general and GCRs in particular is based on incorrect statistical assumptions. This was illustrated in a non-catastrophic episode, the financial crisis of 2008. Even more alarming is the evidence that institutions such as markets do not price risk correctly and so do not perform their central information gathering and signalling function. In chapter 6, we will consider the important question of why these market outcomes occur.

On a positive note, serious thought is taking place: a number of professional research organisations and think tanks now focus on studying GCR (see the list of links at the end of this work for details). Many other organisations give the topic some attention, and most think tanks and research institutes concerned with technology and environmental or climate policy list GCR as one of their main concerns. In addition, some organisations, such as Cathedral Thinking and The Long Now Foundation, are concerned with addressing various institutional problems. More negatively, this has not yet had a wider impact on policymaking. It remains to be seen whether the experience of the Covid-19 pandemic may change this.

How should we react to these dangers? One argument is that we should ignore them, thinking that the prognosticators of possible doom are like Chicken Little, who worried that the sky was going to fall. Proponents of this argument state not only that the chances of a GCR are so low as to not be worth worrying about, but also that taking these fears seriously will waste resources and take effort and attention away from more acute and soluble problems. There are two responses to this view: first, it underestimates the actual probability of some kind of GCR happening soon, because the way probability is thought of is faulty; second, the idea that responding to the threat posed by GCRs must compete with other useful activity is incorrect.

If we do take the advice of people such as Martin Rees and Stephen Hawking seriously, however, what should we do? It is perfectly possible and, in some cases, reasonable to conclude that the risk is real but that it does not make sense to do anything about it, at least not anything that consumes resources. This is where economics comes into play because what we are talking about here is the value of resources and the costs of different uses of those resources in terms of forgone alternative uses (opportunity costs). Questions also exist about the relative costs to put right the damage caused by a GCR and the probability of a GCR occurring compared with the cost of action taken to head off or mitigate such an event. This kind of cost–benefit calculation lies at the heart of economics. Just as we need good science and probabilistic reasoning and mathematics, so we also need sound economic thinking to avoid costly mistakes.

Given that, a striking and regrettable feature of the discussion so far around GCR is how little input there has been from economists, and how much of that has been of very poor quality. There are some notable exceptions, however. The most prominent coverage has come from Richard Posner, who has written an excellent book on the public policy response to catastrophic risks (Posner 2004). We need more of this if we are to make informed decisions as to what kind of GCR, if any, we should take seriously and what actions, if any, it makes sense to then take. Much of the reasoning required is well known to students of insurance and risk management, and there is a range of tools available to help us understand the options available.

If we conclude that the possibility of a specific GCR happening is sufficiently high that it is worth taking seriously (i.e. incurring costs to prevent or mitigate), and even more if we conclude that the possibility is underestimated or increasing, what kinds of action might we consider? It might be that some actions could reduce the chances of that GCR happening or even head it off entirely. In other cases, it might be that the best course of action is one of mitigation, of actions that will reduce the impact of a global catastrophe or shorten its duration. This could be because the probability of the event occurring is so high or because, although being unlikely to happen in any given year or short-duration timespan, we can be sure it will happen sooner or later and there is no practical way of stopping it.

There may be some cases where mitigation is not feasible, but, in that event, it may be possible to take precautions to ensure that catastrophe is not total and that there is some way of ensuring the survival of humanity, or the recovery of civilisation, in the much longer term. All of these choices need input from scientists and engineers, but also historians, sociologists and, not least, economists.

The remainder of this book is organised as follows. The first chapter sets out in more detail what GCRs are and how to define them. The second examines the mathematics regarding the probability of GCRs and the question of why so much of the thinking about this is misguided. The third sets out an analytical framework for understanding the different types of GCR and explores the question of why several of these have only recently come to attention; why they are becoming more rather than less probable; and why concern about them has intensified among the scientifically informed. The fourth chapter makes up the core of the work and contains a survey of the different kinds and categories of possible GCR. The fifth chapter addresses the big question of why we should be concerned at all about GCRs, as opposed to simply ignoring them. The sixth, which is the other main part of the work, explains how to think about this economically. It also introduces two related ideas, the comparatively well-known idea of a precautionary principle (but modified by economic reasoning) and the less well-known but very important idea of a proactionary principle, again with economic reasoning brought to bear. The seventh and final chapter looks at how, if at all, we should respond to the challenge of GCRs. It starts by unwrapping ‘we’ to clarify who or what should be acting and in what manner. It then explores the basic principles that should underlie responses – this involves examining the apparent (to some) tension between the ideas looked at here and free-market principles and insights. It continues by looking at some of the concrete measures that can be justified in each of the particular kinds of GCR identified – justified, that is, by a combination of risk assessment and economic reasoning. The concluding chapter examines in general terms the need for institutional reforms to many market and social institutions, in order to bring about a major shift in time preferences, discount rates and investment horizons.

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About the Author

Stephen Davies is Senior Education Fellow at the Institute of Economic Affairs. From 1979 to 2009 he was Senior Lecturer in the Department of History and Economic History at Manchester Metropolitan University. He has also been a Visiting Scholar at the Social Philosophy and Policy Center at Bowling Green State University, Ohio, and a Program officer for the Institute for Humane Studies in Arlington, Virginia. His many publications include Empiricism and History (Palgrave Macmillan, 2003) and The Wealth Explosion: The Nature and Origins of Modernity (Edward Everett Root, 2019).


  1. Apocalypse soon: the scientists preparing for the end times. New Statesman, 25 September 2014 (https://w w