This Is the Way the World Ends, Not with a Bang but Bonds and Bullets
Frontiers in Climate (Dec. 2, 2021), DOI: 10.3389/fclim.2021.758021
12 Pages Posted: 2 Sep 2021 Last revised: 2 Dec 2021
Date Written: August 13, 2021
This article explores instinctive frames of human decision-making in environmental and resource economics. Higher-moment asset pricing combines rational, mathematically informed economic reasoning with psychological and biological insights. Leptokurtic blindness and skewness preference combine in particularly challenging ways for carbon mitigation. At their worst, human heuristics may generate perverse decisions. Information uncertainty and the innate preference for bonds-and-bullets portfolios may impair responses to catastrophic climate change.
Keywords: skewness, kurtosis, information uncertainty, irreversibility, environmental economics, asset pricing, portfolio theory
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