Question

In: Economics

Current models of climate change and cost-benefit analysis can rely heavily on the inclusion of extremely...

Current models of climate change and cost-benefit analysis can rely heavily on the inclusion of extremely low probability but very high cost (catastrophic and irrevocable ecosystem changes, for example) events. Do inclusion of these events increase the validity of the analysis or do they bias the results?

Solutions

Expert Solution

Inclusion of extremely low probability events helps bring diversification, reduced errors, improvised accuracy, spread across data with uniformity, better transparency in insights and thus elimination of biasedness. Overall it brings comprehensive and drill down analysis and helps better forecasting and decision making in real time and alerts.


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