Natural and Man-Made Catastrophes – Theories, Economics, and Policy Designs

Natural and Man-made Catastrophes – Theories, Economics, and Policy Designs Natural and Man-made Catastrophes – Theories, Economics, and Policy Designs S. Niggol Seo Muaebak Institute of Global Warming Studies Seoul South Korea This edition first published 2019 © 2019 John Wiley & Sons All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions. The right of S. Niggol Seo to be identified as the author of this work has been asserted in accordance with law. 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Library of Congress Cataloging-in-Publication Data has been applied for ISBN: 9781119416791 Cover Design: Wiley Cover Image: © Zloyel/iStockphoto; © Vladimir Vladimirov/iStockphoto; © prudkov/iStockphoto; © Galyna Andrushko/Shutterstock; © Fotos593/Shutterstock Set in 10/12pt WarnockPro by SPi Global, Chennai, India 10987654321 v Contents List of Figures ix List of Tables xi About the Author xiii Preface and Acknowledgments xv 1 The Economics of Humanity-Ending Catastrophes, Natural and Man-made: Introduction 1 1.1 Fables of Catastrophes in Three Worlds 1 1.2 Feared Catastrophic Events 3 1.3 Global or Universal Catastrophes 7 1.4 A Multidisciplinary Review of Catastrophe Studies 11 1.5 Economics of Catastrophic Events 16 1.6 Empirical Studies of Behaviors Under Catastrophes 18 1.7 Designing Policies on Catastrophic Events 21 1.8 Economics of Catastrophes Versus Economics of Sustainability 25 1.9 Road Ahead 26 References 26 2 Mathematical Foundations of Catastrophe and Chaos Theories and Their Applications 37 2.1 Introduction 37 2.2 Catastrophe Theory 39 2.2.1 Catastrophe Models and Tipping Points 40 2.2.2 Regulating Mechanisms 42 2.3 Chaos Theory 43 2.3.1 Butterfly Effect 44 2.3.2 The Lorenz Attractor 45 2.4 Fractal Theory 46 2.4.1 Fractals 46 2.4.2 The Mandelbrot Set 49 2.4.3 Fractals, Catastrophe, and Power Law 50 2.5 Finding Order in Chaos 55 2.6 Catastrophe Theory Applications 60 vi Contents 2.7 Conclusion 61 References 62 3 Philosophies, Ancient and Contemporary, of Catastrophes, Doomsdays, and Civilizational Collapses 67 3.1 Introduction 67 3.2 Environmental Catastrophes: Silent Spring 69 3.3 Ecological Catastrophes: The Ultimate Value Is Wilderness 73 3.4 Climate Doomsday Modelers 76 3.5 Collapsiology: The Archaeology of Civilizational Collapses 79 3.6 Pascal’s Wager: A Statistics of Infinity of Value 82 3.7 Randomness in the Indian School of Thoughts 85 3.8 The Road to the Economics of Catastrophes 88 References 89 4 Economics of Catastrophic Events: Theory 95 4.1 Introduction 95 4.2 Defining Catastrophic Events: Thresholds 98 4.3 Defining Catastrophic Events: Tail Distributions 100 4.4 Insurance and Catastrophic Coverage 104 4.5 Options for a Catastrophic Event 110 4.6 Catastrophe Bonds 114 4.7 Pareto Optimality in Policy Interventions 119 4.8 Events of Variance Infinity or Undefined Moments 125 4.9 Economics of Infinity: A Dismal Science 129 4.10 Alternative Formulations of a Fat-tail Catastrophe 132 4.11 Conclusion 135 References 137 5 Economics of Catastrophic Events: Empirical Data and Analyses of Behavioral Responses 145 5.1 Introduction 145 5.2 Modeling the Genesis of a Hurricane 147 5.3 Indices of the Destructive Potential of a Hurricane 149 5.4 Factors of Destruction: Wind Speeds, Central Pressure, and Storm Surge 151 5.5 Predicting Future Hurricanes 153 5.6 Measuring the Size and Destructiveness of an Earthquake 156 5.7 WhatCausesHumanFatalities? 159 5.8 Evidence of Adaptation to Tropical Cyclones 162 5.9 Modeling Behavioral Adaptation Strategies 166 5.10 Contributions of Empirical Studies to Catastrophe Literature 171 References 172 6 Catastrophe Policies: An Evaluation of Historical Developments and Outstanding Issues 177 6.1 Introduction 177 Contents vii 6.2 Protecting the Earth from Asteroids 178 6.3 Earthquake Policies and Programs 181 6.4 Hurricane, Cyclone, and Typhoon Policies and Programs 182 6.5 Nuclear, Biological, and Chemical Weapons 187 6.6 Criteria Pollutants: The Clean Air Act 191 6.7 Toxic Chemicals and Hazardous Substances: Toxic Substances Control Act 198 6.8 Ozone Depletion: The Montreal Protocol 201 6.9 Global Warming: The Kyoto Protocol and Paris Agreement 203 6.10 Strangelets: High-Risk Physics Experiments 207 6.11 Artificial Intelligence 209 6.12 Conclusion 210 References 210 7 Insights for Practitioners: Making Rational Decisions on a Global or Even Universal Catastrophe 219 7.1 Introduction 219 7.2 Lessons from the Multidisciplinary Literature of Catastrophes 221 7.3 Fears of Low-Minds and High-Minds: Opinion Surveys 228 7.4 Planet-wide Catastrophes or Universal Catastrophes 230 7.5 Making Rational Decisions on Planet-wide or Universal Catastrophes 234 7.6 Conclusion 241 References 241 Index 249 ix List of Figures Figure 1.1 Deadliest earthquakes during the past 2000 years. 4 Figure 1.2 Annual number of cyclone fatalities in the North Atlantic Ocean since 1900. 19 Figure 2.1 Geometry of a fold catastrophe. 40 Figure 2.2 The Lorenz attractor. 46 Figure 2.3 The first four iterations of the Koch snowflake. 48 Figure 2.4 The Mandelbrot set. 50 Figure 2.5 Exponential growth under a power law utility function. 54 Figure 2.6 Population bifurcation. 56 Figure 4.1 Number of victims from natural catastrophes since 1970. 96 Figure 4.2 Pareto–Levy–Mandelbrot distribution. 103 Figure 4.3 Annual insured catastrophe losses, globally. 106 Figure 4.4 The government cost of federal crop insurance. 110 Figure 4.5 Spreads for CAT bonds versus high-yield corporate bonds. 117 Figure 4.6 Outstanding CAT bonds by peril (as of December 2016). 118 Figure 4.7 A trajectory of carbon tax with uncertainty. 124 Figure 4.8 A family of Cauchy distributions with different scale parameters. 127 Figure 5.1 Hurricane frequency in the North Atlantic: 1880–2013. 149 Figure 5.2 Changes in power dissipation index (PDI) and sea surface temperature (SST) from 1949 to 2009 in the North Atlantic Ocean. 151 Figure 5.3 The fatality–intensity relationship of tropical cyclones in South Asia. 160 Figure 5.4 The surge–fatality relationship of tropical cyclones in the North Indian Ocean. 164 Figure 6.1 History of the sulfur dioxide allowance price of clearing bids from spot auction. 198 Figure 7.1 Catastrophes by the spatial scale of events. 231 xi List of Tables Table 1.1 Deadliest cyclones, globally. 21 Table 2.1 Pareto distribution of American wealth. 51 Table 2.2 Calculating the Feigenbaum constant for a nonlinear map. 58 Table 2.3 Calculating the Feigenbaum constant for a logistic map. 59 Table 2.4 Calculating the Feigenbaum constant for the Mandelbrot set. 60 Table 3.1 A summary of topics covered. 69 Table 4.1 Insured losses from catastrophes by world region in 2016. 107 Table 4.2 Growth of the US Federal Crop Insurance Program. 108 Table 5.1 Projections of tropical cyclones in the southern hemisphere by 2200. 154 Table 5.2 Projections of tropical cyclones in South Asia by 2100. 155 Table 5.3 Earthquake statistics, worldwide. 159 Table 5.4 Estimates of intensity, income, and surge effects. 163 Table 5.5 An NB model for the cyclone shelter program effectiveness (number of cyclone fatalities). 166 Table 5.6 Probit choice model of adopting a tropical cyclone adaptation strategy in southern hemisphere ocean basins. 168 Table 5.7 Probit adoption model of adaptation strategies to cyclone-induced surges and cyclone intensity in South Asia. 170 Table 6.1 Historical budgets for US NEO observations and planetary defense. 180 Table 6.2 Tropical cyclone RSMCs and TCWCs for ocean regions and basins.

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