Suppose you knew that a hurricane was coming, but meteorologists were uncertain if it would make landfall as a Category 2 or a Category 5 storm. Which scenario should you prepare for?

The problem you face reflects the costs of assuming that it is a Category 5 when it is only a Category 2, and vice versa. The latter scenario implies deaths and destruction that could have been avoided through evacuations, well-supplied shelters, and precautionary shutdowns. The first scenario implies unnecessary preventive costs. In the case of hurricanes, we all agree that it makes sense to err on the side of cau...