Risk, ambiguity, deep uncertainty Flashcards
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Maximin
How to find it:
* For each possible climate policy d1, d2, d3, find the model m1, m2, m3 with the smallest value (=security level)
* Then, select the policy in order for this smallest value to be the highest possible.
One of the most important models in robust decision making (Wald, 1940s)
What approach does Pindyck suggest for assessing climate change catastrophes?
Pindyck proposes using a similar approach to Cold War risk analysis based on plausibility rather than perceived precision.
What are the distinct layers of uncertainty in the IPCC framework?
The layers are
- risk (physical uncertainty)
- ambiguity (model uncertainty)
- deep uncertainty (model misspecification).
Give an example of a situation that falls under risk in the context of uncertainty.
The number of car accidents in Italy next year, where we have sufficient information to represent the stochastic nature of the problem through a single probability distribution.
What is ambiguity in the context of uncertainty?
Ambiguity refers to model uncertainty, where the true underlying mechanism is uncertain, even after specifying a model.
What is deep uncertainty?
Deep uncertainty refers to model misspecification, where the true model may not belong to the posited collection of models, leading to unknown unknowns.
Explain the Turkey Illusion and its relevance to deep uncertainty.
The Turkey Illusion highlights the dangers of relying on a misspecified model, where a turkey’s prediction about its fate is shattered on Thanksgiving, indicating the presence of deep uncertainty.
What is the criterion for decision making under uncertainty based on expected value?
The expected value criterion assumes risk neutrality and calculates the average value of outcomes based on probabilities.
What is the maximin criterion for decision making under uncertainty?
The maximin criterion focuses on avoiding worst-case scenarios, especially when the consequences could be catastrophic.
How is the maximin criterion applied in decision making?
It involves selecting the policy with the highest security level by choosing the model with the smallest value for each possible climate policy.
When is the maximin criterion particularly relevant?
The maximin criterion is particularly relevant when extreme events are likely and their consequences could be catastrophic.
What is the debate between expected value and maximin in climate change science and policy?
Climate change science has focused on projecting central tendencies, favoring the expected value criterion, but when extreme events with fat tails are likely, the maximin criterion is considered more appropriate.
