Economists are supposed to be good at understanding risk.
Decision-making in the face of uncertainty, after all, is the discipline’s bread and butter. Yet at a time when real-world risks — geopolitical, macroeconomic, financial, public-health and environmental — are piling up, many economists seem to be at a loss.
Although businesses and investors stand to make a lot of money if they can properly assess and navigate the current risk environment, no one seems to have a good explanation for why we are where we are. This is especially true in the case of climate change: It is now clear that the risks have been systematically underestimated, and thus mis-priced, all along.
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