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Robert W. Hahn is co-founder and executive director of the American Enterprise Institute-Brookings Joint Center and a resident scholar at AEI. Previously, he worked for the Council of Economic Advisers. He also has served on the faculties of Harvard University and Carnegie Mellon University. Dr. Hahn frequently contributes to leading scholarly journals and general-interest periodicals, including the American Economic Review, Yale Law Journal, Science, and the New York Times., He is the author of Reviving Regulatory Reform: A Global Perspective and In Defense of the Economic Analysis of Regulation. In addition, Dr. Hahn is co-founder of the Community Preparatory School--an inner-city middle school in Providence, Rhode Island, that provides opportunities for disadvantaged youth to achieve their full potential.
Richard A. Posner is a senior lecturer in law at the University of Chicago Law School. Following his graduation from Harvard Law School, Judge Posner clerked for Justice William J. Brennan Jr. From 1963-65, he was assistant to Commissioner Philip Elman of the Federal Trade Commission. For the next two years he was assistant to the solicitor general of the United States. Prior to going to Stanford Law School in 1968 as associate professor, Judge Posner served as general counsel of the President's Task Force on Communications Policy. He first came to the University of Chicago Law School in 1969, and was Lee and Brena Freeman Professor of Law prior to his appointment in 1981 as a judge of the U.S. Court of Appeals for the Seventh Circuit. He was the chief judge of the court from 1993 to 2000. Judge Posner has written a number of books, including Economic Analysis of Law (5th ed., 1998), The Economics of Justice (1981), Law and Literature (2d ed. 1997), The Problems of Jurisprudence (1990), Cardozo: A Study in Reputation (1990), The Essential Holmes (1992), Sex and Reason (1992), Overcoming Law (1995), The Federal Courts: Challenge and Reform (1996), Law and Legal Theory in England and America (1996), The Problematics of Moral and Legal Theory (1999), and Antitrust Law (2d ed. 2001) as well as many articles in legal and economic journals. He has taught administrative law, antitrust, economic analysis of law, history of legal thought, conflict of laws, regulated industries, law and literature, the legislative process, family law, primitive law, torts, civil procedure, evidence, health law and economics, and jurisprudence.
Conference Summary
On March 5, 2003, the
Judge Posner began the lecture by describing how the nature of catastrophic risks eludes standard analytical frameworks for assessing risk. Since most potential catastrophes have never occurred in people’s lifetimes, it is difficult for people to place a value on reducing such risks. For instance, although people may be willing to pay seventy dollars to reduce the probability of dying by 1 in 100,000, they may not know how much to pay to reduce their risks of dying by 1 in 10 million. Moreover, poor people may be willing to pay far less than rich people would to reduce risks of improbable events because they have fewer resources to spare. Should poor countries, such as those devastated by the tsunami, spend less on reducing the risk of a future catastrophe? Mr. Posner suggested that standard valuation frameworks could not adequately answer these uncertainties.
Despite the uncertainties in estimating the probabilities of catastrophe and the benefits of taking measures to reduce these risks, Mr. Posner argued that cost-benefit analysis could still be used in comparing expenditures across risks. As an example, he estimates that the benefits from spending a larger share of NASA’s budget on mapping possible asteroid collisions and less on manned space flights would far outweigh the costs. He provided several explanations for why some catastrophic risks, such as asteroid collisions or the threat of abrupt global warming, receive so little attention. First, they are difficult for people to understand since they are not part of human memory. Second, politicians have limited time horizons in office, which causes them to discount future disasters at a very high rate. Third, government is a centralized institution with a limited span of attention to focus on the most salient problems, causing low probability outcomes to be ignored rather than subjected to a cost-benefit analysis. Finally, it is difficult for countries to organize against a global menace because many poor countries will want to free ride off of rich countries’ efforts.
Mr. Posner concluded by illustrating how current public expenditures for reducing risks imply a probability of catastrophe that is far too low. He determined implied probabilities for several potential catastrophes, including bioterrorism, asteroid collisions, and global warming by dividing the amount spent on reducing these risks by the total losses incurred if any of these disasters occurred. He argued that because the actual estimated probabilities are higher than implied by our expenditures, government should spend more to reduce the risks of these catastrophes.
The questions following the lecture reflected a variety of concerns about efficient responses to potential catastrophes. One audience member was concerned that allocating resources to low probability events that may occur in the distant future, such as asteroid collisions, would jeopardize more immediate short-term concerns, such as malaria. Mr. Posner responded that although such catastrophic events may have significantly lower probability, their destructiveness is significantly greater than more immediate concerns. Moreover, he thinks that we should not discount the future at such a high rate that it becomes utterly trivial. Another audience member expressed concern that the expected costs of a catastrophe would be infinite since the value of any species is priceless. Mr. Posner countered this assumption by emphasizing that the value of any species, including the human species, has a price.
Rohit Malik is a researcher at the