Policymakers should respond to catastrophic risk by embracing decentralised decision making, entrepreneurship and innovation – not political control or ‘global government’.
Global Catastrophic Risks (GCRs) are world-changing events that could usher in a new dark age or destroy civilisation.
Covid-19 was a warning shot — catastrophic risks are increasing in number and probability, and should be taken seriously.
Addressing these risks requires difficult decisions, considering trade-offs and costs. Economics has an important role to play here.
Top-down government planning and global megaprojects are largely ineffective and inflexible in response to catastrophic risks.
Four years since the UK’s first confirmed Covid-19 case (29th January 2020), the UK remains severely at risk for further catastrophic events.
Apocalypse Next, a forthcoming book from the free market think tank the Institute of Economic Affairs, says the likes of nuclear war, artificial intelligence, or future pandemics severely threaten our planet and its people. Dr Stephen Davies, the author, writes that catastrophic events “are bound to happen sooner or later, the only question is when.”
Crucially, though, Davies stresses the need to think about such risks the right way, based on good science, probabilistic reasoning and mathematics – and a sound economic understanding of costs and benefits.
The book implores policymakers to take the threat of existential risks seriously, even if the odds of them happening are low – like an asteroid hitting the Earth or a deadly bio weapon wiping out humanity. “Basically, we need to be extremely careful and conservative with regard to even low-probability risks if the costs, should they happen, will be catastrophic, global and long-lasting,” Davies writes.
Apocalypse Next, however, warns against despair and fatalism. It sets out a hopeful vision of how the world can better prepare, relying on the talents and ingenuity of individuals. Davies says risks should be identified “to see where innovation is needed to head them off or mitigate their impact; we should think of risk and uncertainty as opportunities rather than just as challenges or problems.”
Davies warns against excessive reliance on inflexible top-down structures, global government and megaprojects. During the Covid-19 pandemic, the failures of that approach were laid bare by the NHS’s inflexibility in the face of rapidly changing circumstances.
In the spirit of Nobel Prize-winning economist Elinor Ostrom, Davies emphasises the importance of voluntary cooperative action and private enterprise over state direction to address catastrophic risks. “Most importantly, it is the combination of experiment and investigation with market exchange and free institutions that is the source of sustained innovation,” Davies writes.
This means decentralising responsibility for preparation among governments, markets, families, and individuals – unleashing the ingenuity of billions to tackle difficult challenges. A decentralised approach would allow for experimentation and gradual improvements, making our responses to global catastrophes more flexible and well-informed.
“Trying to predict what will happen is a waste of time, and attempting to put a date on such forecasts is even worse”, Davies argues. Rather than naively aiming for certainty and fail-proof systems, the book highlights the importance of systems that are flexible, responsive to change and fail well.
Dr Steve Davies, book author and Senior Education Fellow at the Institute of Economic Affairs, said:
“Global catastrophic risks are something we should all take seriously – not in the sense of worrying about them constantly but by taking measures to either prevent them or to lessen their impact should they come to pass. Doing this raises questions of costs and tradeoffs, which is why you need input from economists.
“We should think of the chances of a globally catastrophic event happening as a long-odds bet but with an infinite or near-infinite cost should it happen. No sensible person should take some of the odds involved, and taking out ‘insurance’ is the right thing to do”.
Tom Clougherty, Executive Director of the Institute of Economic Affairs, added:
“The Covid-19 pandemic should have led to a new and better understanding of risk among policymakers, but so far that doesn’t seem to have happened. In this context, Steve’s new book is an important contribution to the debate around global catastrophic risks.
“The big insight here is that economic analysis is absolutely central to determining the right response to the various risks we as a civilisation face. Doing nothing about potentially catastrophic risks would be a scandalous abdication of responsibility; but that doesn’t mean we should just do anything.”
