Weitzman'sdismal theoremsuggests that traditionalcost-benefit analysis failsto accurately measure the downside risks of climate change because ofuncertainty in extreme tail events. It argues thatlow-probability, high-impact events (e.g., catastrophic global warming)candominate economic risk calculations, making itdifficult to justify inactionbased on expected cost assessments alone.

This theorem challenges standard economic models thatdiscount future risks too heavily, advocating forprecautionary climate policieseven in cases ofuncertain probability distributions.