March 22, 2024
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Posted by NCID

Christopher Rauh, a Professor of Economics and Data Science at University of Cambridge, visited the NCID to give as seminar entitled "If You Only Have a Hammer: Optimal Dynamic Prevention Policy".

His paper proposes a dynamic decision model for situations in which a policymaker faces a recurrent risk and has to choose between early action (prevention) and late action (de-escalation). 

The dynamics, damages and actions are modelled in a Markov model. This allows us to first derive three simple theoretical results. First, optimal prevention tends to displace de-escalation. Second, optimal de-escalation can displace prevention. Third, forecasting may make preventive efforts more likely. 

The framework is then applied to a global monthly dataset on armed conflict and risk forecasts for the period 2010-2022. Based on reasonable assumptions, the model reveals preventive policies that currently receive little systematic treatment by governments and international organisations.