Averting Catastrophe: Decision Theory for COVID-19, Climate Change, and Potential Disasters of All Kinds

by Cass R. Sunstein

Best-selling author Cass R. Sunstein examines how to avoid worst-case scenarios

The world is increasingly confronted with new challenges related to climate change, globalization, disease, and technology. Governments are faced with having to decide how much risk is worth taking, how much destruction and death can be tolerated, and how much money should be invested in the hopes of avoiding catastrophe. Lacking full information, should decision-makers focus on avoiding the most catastrophic outcomes? When should extreme measures be taken to prevent as much destruction as possible?

Averting Catastrophe explores how governments ought to make decisions in times of imminent disaster. Cass R. Sunstein argues that using the “maximin rule,” which calls for choosing the approach that eliminates the worst of the worst-case scenarios, may be necessary when public officials lack important information, and when the worst-case scenario is too disastrous to contemplate. He underscores this argument by emphasizing the reality of “Knightian uncertainty,” found in circumstances in which it is not possible to assign probabilities to various outcomes. Sunstein brings foundational issues in decision theory in close contact with real problems in regulation, law, and daily life, and considers other potential future risks. At once an approachable introduction to decision-theory and a provocative argument for how governments ought to handle risk, Averting Catastrophe offers a definitive path forward in a world rife with uncertainty.

Genres: Nonfiction

176 pages, Hardcover

Published April 27, 2021

About the author

Cass R. Sunstein is an American legal scholar, particularly in the fields of constitutional law, administrative law, environmental law, and law and behavioral economics, who currently is the Administrator of the White House Office of Information and Regulatory Affairs in the Obama administration. For 27 years, Sunstein taught at the University of Chicago Law School, where he continues to teach as the Harry Kalven Visiting Professor. Sunstein is currently Professor of Law at Harvard Law School, where he is on leave while working in the Obama administration.

Reviews

[Chris Brady · Rating 4 out of 5]

Very interesting reading right now

[Ann Hidayat · Rating 4 out of 5]

(3.5/5) It's a short book on catastrophe. The book is well-written even for me that is not an expert on policy making. The author clearly explains on some event that occurs very rarely yet can't be measure by probabilistic method. He points our several way in order to assess the cost and risk in order to approach solution of catastrophic phenomena that is irreversible.

I feel that this is a good introduction, but not deep enough and lack of examples. On the other hand, catastrophic even occurs very rarely, that there is no sufficient historical event that we can refer to except a few. Still the author explains well.

A good read. But less engaging compare to his other books.

[Venky · Rating 3 out of 5]

Bestselling author Cass Sunstein in his short, albeit interesting work, attempts to amalgamate the process of regulation with the science of decision theory, with a view to arriving at solutions for improbable occurrences that leave decision makers totally unprepared, such as pandemics and climate change. Underpinning Sunstein’s overarching proposal, is the maximin principle which advocates selecting an approach that eliminates the worst of the worst-case scenarios. As Sunstein himself acknowledges, the maximin principle has come under fire from various economists for certain inadequacies. The Hungarian-American Nobel Prize winning economist, John Charles Harsanyi, derided this principle by arguing that it produced irrationality and even madness. “if you took the maximin principle seriously you could not ever cross the street (after all, you might be hit by a car); you could never drive over a bridge (after all, it might collapse); you could never get married (after all, it might end in a disaster), etc. If anybody really acted in this way, he would soon end up in a mental institution.”

Sunstein works around the limitations of the principal, and after making his assertions regarding the efficacy of the Maximin model with recourse to various hypothetical problem statements, encapsulates his solutions in the form of suggestions that almost seem reductionist in their simplicity and amenability for implementation. These suggestions, inter alia include:

Outcomes that embed within genuinely catastrophic outcomes (potential) and such outcomes are not perceived to be highly improbable, the most optimal manner to maximize net benefits might be to eliminate such outcomes;
In the face of “fat-tail” scenarios, the Maximin principal might be the most appropriate choice. This is because of the fact that the probability of extreme and catastrophic events does not decline sufficiently rapidly to compensate for risk aversion to encountering such catastrophic events; and
Even though under 200 pages, the book is packed with references to concepts that are complex in their sweep and arcane in their wake. Concepts such as Knightian Uncertainty (in its most macroscopic definition, an inability to assign probabilities to various outcomes); Precautionary Principle (a broad epistemological philosophy, used mostly in the field of environmental science that advocates a wait and watch approach before instituting radical innovations, that otherwise might lead to disaster); Principal of Insufficient Reason ( A concept first advocated by Jakob Bernoulli and which asserts that equal probabilities must be assigned to each of competing assertions if there is no positive reason for assigning them different probabilities); and Frequentism (a notion that defines an event’s probability as the limit of its relative frequency in many trials).

Sunstein liberally draws on the works of Robert S. Pindyck in many parts of the book to bolster his propositions regarding the applicability and utility of the Maximin principle. Pindyck, in tandem with Ian W.R. Martin had published a seminal paper titled “AVERTING CATASTROPHES:THE STRANGE ECONOMICS OF SCYLLA AND CHARYBDIS” for the National Bureau of Economic Research. The paper explored the policy interdependence of catastrophic events, and demonstrated that considering these events in isolation can lead to policies that are far from optimal. The authors, going beyond the tried and tested cost-benefit methodology, also formulated a few rules for determining the events that ought to be necessarily averted and events which need not be averted.

Lots of insightful examples highlighting the conundrum faced by the regulatory authorities in formulating catastrophe aversion policies, especially in the case of pandemics and climate change are set out by Sunstein. For example, on account of the raging COVID-19 pandemic, that is wreaking havoc across the world, “closing the schools is not exactly an engine of equal opportunity. And if costly regulation, driven by the maximin principle, is imposed on sources of risk (such as fossil fuels and motor vehicles), it might well impose disproportionate hardship on the poor.”

“Averting Catastrophe”, contains very unique and innovative insights on various aspects of decision making and the improbability of employing probability theory in a uniform and harmonized manner, the book seems to be crafted for a niche audience. The books seems to be for the particular consumption of Mathematicians and policy makers. A subject of such import and magnitude could have been simplified so that everybody irrespective of their chosen career profession conscientiously become “stakeholders” in an attempt to redress the grave grievance posed by events such as pandemics and climate change. That would have been a much needed “Nudge” (no pun intended).

(Averting Catastrophe: Decision Theory for COVID-19, Climate Change, and Potential Disasters of all Kinds will be released by New York University Press on the 20th of April 2021)

[Timothy · Rating 1 out of 5]

The book is Cass Sunstein’s attempt to bring decision theory into the regulation of social problems for which there are no clear variables available to develop a cost benefit analysis. In these non-routine, or even extreme circumstances there are a host of tools available to help guide regulatory practices. Sunstein lays these out in a sequence of chapters entitled The maximum principle, the precautionary principle,uncertainty, objections, and irreversibility. In the end he suggests we apply the maximum rule in special and limited cases. The book, despite the title talks very little about COVID, and contributed little to climate change discussion. These are convenient foils for his overarching argument but could have been a edited out with no impact on the book whatsoever. The book is poorly written, my spouse who has taught middle schoolers said it was like a very poor eighth grade essay. The book is unfortunately dense and I cringe at the thought of assigning it to my undergraduates. I think, had he merely taken OMB circular A-4, which he co write during the Obama administration, and annotated it the resulting article would have been sharper, clearer, and more useful to the reader .

[Richard Marney · Rating 5 out of 5]

A short book of just over 100 pages, but don’t let the length deceive you. There’s a lot here.

The author’s focus is on decision making related to regulatory policy under conditions of uncertainty. Salient examples cited fall into environmental and health (read: pandemic) policy categories.

I read the book from the point of view of investment (buy and sell side both) decisions in the context of the pandemic morphing into its next, so-called endemic phase. Some brilliant insights were gained through the author’s critical discussion of the “Maximin Principle”.

Worthwhile read, to say the least!

[Ze Shen Chin · Rating 3 out of 5]

It's a pretty short book at just about 100-pages long. But it's still 90 pages too long. I don't think he said anything wrong or controversial — it's pretty logical and commonsensical. But it's just too repetitive.

In short:
- There are different ways of making decisions in the face of uncertainty, e.g. expected value, maximin.
- Sometimes you just don't know, i.e. knightian uncertainty.

[Jana · Rating 3 out of 5]

Cass R. Sunstein puts forward various frameworks policy-makers may face where there is not enough information available. That makes the decision very difficult, kind of walking in the darkness, looking for an exit, scenario. Various principles are discussed. This brings the reader close to how such a hard decision should be confronted from the theoretical point of view. What I liked the most is the chapter on Maximin principle (does it make sense to eliminate the worst-case scenario?) when he collapses really complex policy cases into amazingly easy 2 option decisions examples. He argues that sometimes it is better to act than do nothing and just wait for more information to be available. Examples are captivating. The whole book is very enjoyable, technical though. If you want to think about difficult scenarios for public policy and regulation in which cost-benefit analysis is far from straightforward, there you go. And if you can then help to design policies that avoid to harm the vulnerable with what you have learned, we all can be better-off.

[Steven · Rating 1 out of 5]

How much of a pseud do you have to be to buy into this? The older I get the more obvious all of that Kahneman nonsense gets to be. Maybe you can fool a 19yo undergrad with his research, but "what comes to mind is what comes to mind" is worthless pseud babble on par with Hayek's sensory order (re: availability heuristic).

When you read these prominent intellectuals, and you're no longer impressed by the use of technical terms, you realize it's all vapid. It's all intellectual potemkin village building.