Random thoughts of an economist

How to forecast the impact of a rare event?

Posted in Japan by kafuwong on March 17, 2011

Rare events happen.  If we want to forecast the impact of an event, we can look at the history of similar events.  If we have several similar events in the past, we can take average of the historical event.  If we have only one similar event in the past, that event is what we have to rely on to make a forecast. 

The Japanese nuclear plant explosion is a rare event.  The only event that is similar to it is the incident at  Chernobyl.  Below is the part of the history book that I will start with.