Value of Earth - Purpose in Economic Risk Assessment

Purpose in Economic Risk Assessment

Although assigning a value to the entire Earth may seem whimsical, it is highly important in risk assessment. In the extreme view, absolutely nothing can be carried out without some risk that it will directly or indirectly exterminate life on earth, however usually the probability is so low as to be negligible. Another way of stating the value of the earth is the risk we are willing to take with it. And the amount of risk we are willing to take must be balanced against the possible reward. Such calculation will invariably use other moral or environmental assumptions for other outcomes, such as the value of human life.

To give a contrived example, supposing a research project could yield a cure for a certain fatal disease, but there is a small risk that the experiment itself could accidentally (through incompetence, negligence or malicious intent say) spread the disease in a virulent form - with a remote chance of wiping out the planet (or at least life on earth). By assigning a value to the potential lives saved and to the potential loss of life in failure, it becomes simple to assess how much risk is too much risk.

When used in these situations the value used for the Earth could vary markedly, and have little bearing on real currency.

Other situations, however, may have more direct financial application, such as an asteroid defence mechanism. There is a minute probability of an asteroid strike large enough to destroy the planet - what should we do about this? Clearly if we poured the entire GDP of the planet into protecting against this, we could minimise the risk, but might there be better things to spend it on? Instead, armed with a value for the planet, we can put in place systems that provide early warning and a good measure of the probability of asteroid impact. This knowledge itself reduces the average cost of a meteor impact to an "acceptable" level.