Miracles and Catastrophes

43 Pages Posted: 25 Apr 2018 Last revised: 7 Apr 2019

See all articles by Arden Rowell

Arden Rowell

University of Illinois College of Law

Date Written: April 5, 2019

Abstract

Over the last decade, a robust interdisciplinary literature has developed to guide policymakers in managing phenomena that expose society to the possibility of extreme-downside events, such as those that might result from natural disasters, terrorism, nuclear war, asteroid strike, and extreme climate change. Oddly, there is no reciprocal literature for the opposite of catastrophic risk: for phenomena that expose society to the possibility of extreme-upside events, such as might result from curing cancer or eradicating malaria, successfully colonizing other planets, ending malnutrition, developing autonomous vehicles, or implementing other transformational new technologies. Such events, which I call “miracles,” share many critical similarities with catastrophes: both involve massive impacts; invoke risk and uncertainty; generate tricky intertemporal distributions; and trigger cognitive phenomena related to each of these qualities. While miracles also differ from catastrophes in important ways—in the fact that miracles are good rather than bad; are less likely than catastrophes to invoke loss aversion; and tend to generate health, wealth, and optimism instead of their opposites—these differences are not sufficient to justify the current state of miracle neglect. Policymakers should attend to the chances of extreme-upside events, which are both possible and—at least sometimes—responsive to policy intervention.

Keywords: miracle, catastrophe, disaster, extreme impacts, loss aversion, natural hazard, risk regulation, extreme-upside, fat tails, best-case scenario

JEL Classification: K1, K23, K2, K10, K32, K30, K40, K49

Suggested Citation

Rowell, Arden, Miracles and Catastrophes (April 5, 2019). University of Illinois College of Law Legal Studies Research Paper No. 18-19. Available at SSRN: https://ssrn.com/abstract=3157287 or http://dx.doi.org/10.2139/ssrn.3157287

Arden Rowell (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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