Abstract

This paper aims to consider the meaning of the dismal theorem, as presented by Martin Weitzman [(2009) On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics 91, 1–19]. The theorem states that a standard cost–benefit analysis breaks down if there is a possibility of catastrophes occurring. This result has a significant influence on debates regarding the economics of climate change. In this study, we present an intuitive similarity between the dismal theorem and the St. Petersburg paradox using a simple discrete probability distribution.