On The Long-Term Future Importance of Investments in Economic Growth and Global Catastrophic Risk Reduction

May 4, 2020   /  

Student: Pedro Adami Oliboni
Majors: Mathematics, Philosophy
Minor: Economics
Advisors: John Ramsay, Garrett Thomson

Melissa Schultz I.S. Research Prize
in Sustainability and the Environment
3rd Place

This is a study about the optimal allocation of resources between investments in economic growth and global catastrophic risk reduction. I discuss different ways of conceiving of the value of economic growth. I outline some important concepts for understanding global catastrophic risks and the challenges in modelling such risks. I categorize and clarify philosophical presuppositions that are important to the project. I present a novel argument for why improving the far future may be our moral priority. I discuss at length the Ramsey approach to optimal allocation of resources. I provide an introduction to continuous Optimal Control Theory, a method for solving problems of dynamic maximization. I then use this method to develop my own model for the optimal investing in economic growth and global catastrophic risk reduction. This model illustrates how standard mathematical-economics methodology can be used to tackle my research objective while incorporating the philosophical positions discussed.

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Pedro will be online to field comments on May 8:
2-4pm EDT (PST 11am-1pm, Africa/Europe: evening)

60 thoughts on “On The Long-Term Future Importance of Investments in Economic Growth and Global Catastrophic Risk Reduction”

  1. Do you determine then how likely it is that people will survive years in the future? So for example, what is the probability that students survive till the year 5000?

    And if it is not likely to have humanity by the year 5000, it is still your best guess at a likelihood. We might just not have enough information now to know what will happen in the year 5000. I guess, my question is how far beyond today does your model make sense?

    1. Prof. Morrison, thanks for the great question!
      I do not determine this probability in my project. However, one must input such probability in order to obtain results from my model.
      I don’t think I have read enough to be able to give a useful guess at what this probability is. As far as I know, some of the best research and thoughts on the likelihood of humanity surviving this century can be found in the recently published book The Precipice by Toby Ord.

      About your second question, on how far beyond today my model makes sense, I think this a very important concern. Not only does uncertainty about the risks we a subject to increases the further into the future we look, but also other model components may not make sense further into the future. One example is the production function, which is supposed to project the output of an economy given resources available. Our productive possibilities are likely to change drastically in the long run, making any such production function obsolete.
      A large part of my project was exactly this task of pointing out what assumptions a model such as mine needs to make, and whether these are plausible.

  2. My biggest problem with the field of economics is that so many in it seem to think it’s an end-all, be-all discipline when in reality, it’s subjected to the same ethical standards and moral quandaries as everything else. I really appreciate this tandem approach to your problem, Pedro! Congratulations on your award, too⁠—it’s definitely well-deserved.

    1. Nick, thank you very much!
      My project was motivated in large part by the idea that we should be clear about the moral assumptions made by economic models that are used to determine how society ought to behave.

  3. Pedro-
    Well done. I love the idea of not discounting future results, i.e., the future is not as important. You suggest replacing this with a probability factor that a future event will occur. Clearly the future discount is a kind of subjective data point. How do you propose we get to a probability factor of the future risk, which I would also suggest to you is also highly subjective?

    Great thought provoking work, Pedro. Congrats on the Schultz Award!

    1. Mr. Norton,

      Thank you for the thoughtful comment and this important question!
      I am far from being an expert on how to determine the likelihood of different existential risks. It is certainly true that as you point out any probability we come up with will be in some sense subjective.
      To construct a probability weigh for each year into the future we need an aggregate subjective probability for all of the different existential risks. Currently, many scientists work separately on determining probabilities for particular risks such as global pandemics, catastrophic climate change, asteroids, etc. To get a probability weight, we need then to find a way to aggregate all of these estimates. In the end, we do obtain an estimate, which requires human judgment in many parts of its formation, but which is also based on careful and rigorous research.

  4. I cannot wait to see what you get up to in the future. You’re the best, and you never cease to impress.

  5. I like your idea of replacing the discount rate with a probability of risk. That is a neat!

    (1) Do you think the probability of catastrophic risk is some sort of lower bound on our individual discount rates? For example, what happens to the discount rate in a social welfare function, if we care more about future generations?
    (3) There is plenty of evidence that people discount the future in decision making. What policies do we have to implement to move humanity towards “inter-temporal impartiality”?

    1. Thanks for the questions Dr. Moledina!

      The idea of using a probability of risk was actually introduced by economist Yew-Kwang Ng.

      1) I am actually not sure I understand this question. Perhaps one thing to make clear here is that individual discount rates (time-preference) don’t actually enter my model. I conceive of the utility function not as representing preferences but as representing wellbeing directly (more like how Bentham understood utility). Furthermore, what people care about internally is not directly important in my model. Rather, what matters is how their wellbeing is affected by what they consume. Under this view, then, the value of each generation is proportional to how many people exist in it, how much consumption is possible at that time, and how likely this generation is to survive to unpreventable existential risks.

      2) This is a great questions that I really hope to explore in the future. The very interesting book Institutions for Future Generations outlines many ideas in this line. A particularly interesting one is the creation of a World Climate Bank which would issue very long-term loans and allocate funds towards fighting climate change. There are also some organizations already working on the problem of political short-termism. One example of this is the All-Party Parliamentary Group for Future Generations in the UK.

  6. Fascinating, Pedro. Did your commitment to this important topic grow out of your work on effective altruism, or vice versa?

    The concept of intertemporal (or intergenerational) impartiality is intuitively compelling to me — ‘seems true’ to me– but I’m not a philosopher so I naively wonder whether it is at all problematic logically.

    For example, does it require us logically to also agree that anything which reduces future human lives is the enemy of the good, e.g., the ‘natural’ lifespan; family planning? Does it logically require us to judge how populous the future generations of our species were “supposed” to be?

    Thank you as always for introducing us to superordinately important ideas.

    1. Dear Dr. Solomon,

      My commitment to this topic definitely grew out of my involvement with effective altruism. Through effective altruism, I was introduced to global priorities research – which is the broad area of my project.

      This is an amazing question! I actually talk about it some in both my IS my Junior IS.
      A few things I think I should say about it:
      -I argue for intertemporal impartiality by first arguing that the appropriate object of moral concern is the momentary experience (as opposed to an entire human life). With this, what is bad about death (if anything) is that it prevents the creation of future good momentary experiences. In this sense, then, the natural lifespan is prima facie bad. If any life could be infinitely long and good, then preventing it from doing so would be bad.
      -Yet, in terms of what is bad or good to do, what matters becomes dependent on how to create the most value out of momentary experiences. So again, prima facie the best we can do is add as many good lives into the future. This is why, then, an existential catastrophe would be so bad: it would prevent the trillions of possible lives (each encompassing countless momentary experiences) that could exist in the future.
      -About family planning, I argue that intergenerational impartiality implies longtermism. Longtermism says that most of what determines the value of our actions is how these actions affect the very long-term future of humanity (because of all of those trillions of lives that could exist in the future). I think, then, that the value of adding or not adding a baby into the world right now depends significantly more on how this affects the long-run than on how positive the life of this child will be.

      1. Pedro, what an inspiring and scholarly reply. It reminds me how much I will miss your inquiring and civic-minded presence on campus in the years ahead. Tudo de bom! Ari

  7. Congrats on the Melissa Schultz Prize! I have to admit an aversion to economics, but I find the incorporation of intergenerational impartiality fascinating!

    What are you doing next?

    1. Maya! Thank you! Congrats to you too for the Melissa Schultz Prize! Your project looks amazing and I’ll probably reach out to you about agent-based modeling in the future 🙂

      My current plan is to do an MSc in economics at Bocconi University in Milan starting this Fall.
      What about you?

      1. Thanks! Glad to talk about ABMs at all times 🙂

        Awesome! I’m leading trail maintenance/restoration crews in Pittsburgh’s public parks this summer and then (hopefully) heading to Guatemala to teach English for a year. (Assuming coronavirus lets me…)

        Keep in touch!

  8. Congrats PedrO!

    With your project interacting with how we ought to act, how do your findings interact with people who hold that an economic formula (or any kind of formula) is not the way to evaluate a world-state for goodness?

    I hope this question makes sense.

    Thanks for everything g this year, and I can’t wait to see what the future holds for you.

    1. Brendan!! Thank you 🙂

      I am not sure I really understand your question. I am afraid I too think that maybe an economic formula is not the best way to evaluate a world-state for goodness. Part of my projects was about investigating what such a formula would look like given certain philosophical positions. Yet, I think that both empirical and moral uncertainty really put such an approach into question. However, I also think that in some sense we need this formula. Trade-offs are real, we can’t ignore them, and it seems like a quantitative formula is often the best way to capture them.

  9. Pedro, it was so fun to watch this project develop over time. I feel like after I learned a bit about this project, global catastrophic risk topics kept coming up in what I’ve been reading and listening to lately- glad I have a friend who is so knowledgable about it. Congrats on being done and I wish you the best in the next stage of life, my friend!

    1. Margaret, it makes me really happy to know my project got you interested in global catastrophic risks. I too wish you all the best and already miss you a lot! Congrats on your awesome IS 🙂

  10. Congratulations, Pedro. This is beautifully expressed, and well thought-out. Great job!

  11. Excellent work Pedro. Thank you for sharing your thought-provoking research and taking the long view. Our future depends on the deep thinking and application of knowledge you demonstrate. All the best to you!

    1. Thank you so much Jodi!! All the best to you too! I’ll miss chatting with you in the digital lab 🙂

  12. Pedro. Congratulations to you for all your success at Wooster, culminating in this so very excellent thesis! It was fun wrestling with these ideas and the mathematics alongside you this year. Keep me posted on how things turn out for the fall and do keep in touch.

    1. Prof. Ramsay, thank you so much for everything!! I learned so much from you between Operations Research, AMRE, and IS. I will definitely keep in touch, all the best!

  13. Excellent work, Pedro! Best wishes for your future, and may it be of equal value to your past and present. I have a couple questions:

    -I though that the main purpose of discounting was so that integrals and/or series actually converge. Do your probability-weighted objects always converge, and, if not, how do you account for that?
    -Do you generally consider yourself an optimist or a pessimist, and has that changed over the course of your work on this project?

    1. Thank you Dr. Fox!

      1) Indeed discounting is often used so that the integral of the social welfare function converges. Mathematically speaking, the probability weight doesnt guarantee that the interval will converge. However, I think that Yew-Kwang Ng has a good argument for why any plausible probability weight will be enough to make the interval converge. This argument can be found in the paper where he introduced the idea of probability weighting and it is based on the fact that population and wealth growth have physical limits.

      2) I am not sure whether I consider myself an optimist or a pessimist. I think that this project has given me some optimism in making clear to me that there are many things we can work on to improve the prospects of humanity.

  14. Hi Pedro,
    It’s great to check in here to see your project and to learn more about what you have been working on this year. Thank you for contributing your work to the symposium, and congratulations on a job well done!

    1. Thank you very much Dr. Graham!! It was great to learn from you last semester. All the best! 🙂

    1. Didn’t expect you here man! Thank you so much. Maybe this calls for some chips and cheese actually 😉

  15. Nice job Pedro – it seems to me that in the case of climate change, we know very well what the future holds in terms of effects like ongoing and predicted sea rise. Sea rise has a huge, incremental impact (mm’s of rise a year) and then superimposed increased damage from hurricanes and storm surges. This low frequency incremental rise and increased probability of damaging storm events is something in theory we could do something about (or at least put aside the capital needed to deal with it or mitigate its impact) – we see it happening and we know it is coming. Other events, such as a pandemic, are much harder predict and to plan for, however they are shorter lived. My question: Why is that this one thing (climate change) that we can predict very well, not considered in costs? It seems to me the future quality of life and economic growth could be maximized if the inevitable costs associated with searise, for example, were considered. We do not have to assume that sea levels will rise – your other assumptions are the harder ones. Congratulations on this work.

    1. Thank you Dr. Wiles!

      Indeed sea level rise and other consequences from climate change could have very serious consequences for future growth and wellbeing. As you mention, we have relatively reliable estimates of the probability of these events, their magnitude, and what we can do about them. For this reason, I think my model deals with them particularly well. In my model, economic growth is a function of, among other things, damages from global catastrophes (such as sea-level rise) as well as expenditure on mitigating these catastrophes. Thus, given knowledge about the severity of these risks and the proportion of mitigation per dollar spent, my model would give us the optimal amount of mitigation efforts for these risks.
      I think it is relevant here to say that my model is based on a model that was created to determine the relationship between pollution levels and economic growth in light of natural disasters (Ikefuji and Horii in “Natural disasters in a two-sector model of endogenous growth”).

  16. Thanks for sharing this fascinating project, Pedro. And congratulations on the Melissa Schultz prize!!

  17. Pedro,
    This is really interesting work and you presented it in a such a smooth fashion. Thank you for sharing here, and congrats on the Melissa Schultz Prize!

  18. Optimal control theory is not an easy area for an undergraduate, and it is impressive to see your work span mathematics, economics, and philosophy. Along with Margaret (math, physics, bio), yours crossed a wide range of disciplinary boundaries. Congratulations, Pedro, and we wish you all the best!

    1. Dr. Pasteur, optimal control theory was certainly very challenging! Thank you!!

  19. Parabens Pedro! Admiro muito a tua curiosidade intelectual y as constantes leçoes de filosofía e questoes socias que recebo de voçe. Parabens pelo MSc! Um abraço!

    1. Patrão!!! Que bom receber seu comentário! Muito obrigado!! Adoro discutir esse tipo de questão com você! Abração!

  20. Dear Pedro,

    Congratulations on your IS and on the prize! What an extraordinarily timely set of questions you chose to explore. Bringing them to the surface, and holding both the philosophical and economic frameworks in parallel in your thinking is very powerful. I also appreciate your discussion of the limitations of your models.

    Here’s a small technical question. I am trying to figure out why there is oscillation in your plot of probability weight vs. time. Is that because of some assumption of a lifespan or other periodic variable that is built into the model?

    It has been great having you at Wooster, and I wish you all the very best for your future.
    Pres. Bolton

    1. Thank you so much for these kind words President Bolton!

      The plot I put in the poster is not representative of my model actually. In order to plot the actual results of my model, I would have to obtain many estimates of model parameters and learn some relatively advanced numerical simulation – which I ended up not having time to do. I just used this plot in the poster to illustrate how a discount rate acts on a social welfare function would differ if it included a discount rate. I made it oscillate because I thought it would make clearer how the discount factor acts on the function.

      All the best!!

  21. Interesting work! What would you change or do differently if you could go back and do this again?

  22. Hey Pedro! I loooved listening to your explanation of your research– it makes me want to take a class on these subjects! Such an important and timely issue. Thank you for your dedication to your research and inspiring others, you inspire me all the time! Wishing you the best in Italy this fall.

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