Environmental risks and ocean industries

In recent research, my associates and I presented a complex set of mathematical scenarios in which developed market economies, characterized by mature and new economy industries, evolve into two (or more) geographic regions. The first, almost invariably coastal or along the banks of rivers, is more attractive to investment in both mature and new economy industries, but is subject to higher risk, both market and environmental. Growth in this first sector is innovation and knowledge intensive, characterized by clustering of similar labor skills and firms, and the instigator of extensive net migration. The second sector is less dynamic and often less developed, but subject to less environmental risk. Climatic, natural, and environmental hazards are undergoing change and may, in some cases, become more threatening. Economies, however, are growing, enabling them to adapt to or even mitigate the damaging consequences of these natural hazards. In this paper, I present an economic growth model set in the two sectors and facing damaging hazards. The hazards are of varying predictability, ranging between quantitative risk and subjective uncertainty.