Risk/Utility Analysis

1992

DISCLAIMER "Fhi_ report wa_ prepared as an account of work sponsored by an agency of the United States Government, Neither the United States Government not any agency thereof, nor any of their _r.,-_,,-20781 employees, makes _tny warranty, express or implied, or _,.ssumes any legal liability or responsibility for the accuracy, completeness, or usefulnes'; of any information, apparatus, product, or process disclose'd, ,-lr represents that fls use would not infringe privately owned rights. Refer. 11E_2 019102 ence herein to any specific commerci'l! product, process, or service by trade nanle, trademark, manufacturer, or otherwise does not necessarily constitute or imply ils endorsement, recommendatiozl, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.

1994

Constraints on the use of benefit-cost tests have generated increased interest in risk-risk analysis as a regulatory test. The effect on individual mortality of the income losses arising from regulatory expenditures can be determined from direct empirical estimates, which this article surveys. The article proposes an alternative formulation based on information on the value of life and the marginal propensity to spend on health, which implies a loss of one statistical life for every $50 million in expenditures. Occupational injury and fatality costs caused by expenditures represent another type of risk tradeoffthat could be considered within risk-risk analysis or, more generally, a benefit-cost test. Key words: risk-risk analysis, value of life, mortality, benefit-cost analysis 1. Risk-risk analysis tests Although economists have long advocated the use of benefit-cost tests for risk regulation, this approach has seldom been reflected in risk regulation policy making. Perhaps in part because of a reluctance to convert health outcomes into a monetary metric, U.S. regulatory agencies have largely based risk regulations on narrower criteria. These guidelines have reflected agencies' legislative mandates, which in many cases prohibit policy decisions based on benefit-cost analysis. In some cases, the legislation prohibits consideration of economic costs altogether. The narrow range of considerations that can influence policy choice has generated increased interest in various forms of risk-risk analysis.1 In particular, if only the implications of policies pertaining to risk aspects are pertinent, how should one structure the policy approach? Even if one is solely concerned with risk reduction, it will not always be desirable to set risk regulations at their most stringent level. Important risk tradeoffs may exist. The focus of this volume is on these risk-risk tradeoffs, with principal emphasis on the linkages between regulatory costs, individual income, and mortality. Perhaps the most direct form of risk-risk analysis is that the policy may pose multiple risks. Consider the case of saccharin, which is the artificial sweetener that was the object of controversy in the mid-1970s. Based on a Canadian study of rats that had been fed saccharin, the FDA concluded that saccharin was a potential carcinogen with a lifetime

Journal of Public Economics, 2010

When a firm undertakes risky activities, the conflict between social and private incentives to exercise safety care requires public intervention. This control takes the form of both monetary incentives but also monitoring taking place either ex ante or ex post, i.e., before or after an accident occurs. We delineate the respective scopes of these monitoring activities when public monitors are either benevolent or corruptible. Separation between the ex ante and the ex post monitors helps to prevent capture, increases the likelihood of ex post investigation and improves welfare.

Risk Analysis, 1995

We propose three principles and a general framework of reasoning for managing risk in the public interest. Principle 1. Risks shall be managed to maximize the total expected net beneJit to socie-The principle that the net benefit is to be maximized across society as a whole is argued to be a sufficient and rational guide to assessing the effectiveness of efforts directed at reducing risk and thus improving health and safety. The net benefit of an activity is the excess of the totality of benefits over the totality of detriments. Principle 2. The safety benejit to be promoted is life-expectancpThe goal is to ensure that risk mitigation efforts maximize the net benefit to society in the specific terms of length of life for all individuals. The effect of an activity on life expectancy is proposed as the proper basic measure of its net safety impact. Life expectancy is a universal measure valid for comparisons both within and among countries and can be adjusted to include health expectancy and other factors such as income levels that affect the quality of life. The impact on life expectancy allows a dispassionate accounting of the good and the bad inherent in any proposal or activity that is in the public interest but has some impact on life and health. Principle 3. Decisions for the public in regard to health and safety must be open and apply across the complete range of hazards to life and health-Systematic efforts to evaluate all the important consequences, both direct and indirect, are required to improve the basis for risk management in society. Balancing of the detriments and the benefits of any given initiative is the key aspect of the undertaking. Safety may well be an important objective in society, but it is not the only one. Thus, allocation of society's resources devoted to safety must be openly and continually appraised in light of other competing social needs because there is a limit on the resources that can be expended to save lives. Maximization of healthful life for all is judged the proper basis for managing risk in the public interest, and that this is achieved when the net of the contribution to the total saving of life exceeds the loss of life.

Reliability Engineering & System Safety, 2015

Many authors argue that we suffer from a lack of ability to treat small risks; we either ignore them completely or give them too much emphasis. An example often referred to is terrorism risk, the reference being the number of fatalities observed due to terror compared to for example deaths in traffic accidents. The thesis is that the risk is overestimated. However, these assertions, that the risks are overestimated and we give them too much emphasisthey are treated out of proportion to their importancecannot be justified in any scientifically meaningful way when there are large uncertainties about the consequences of the activity considered. Over-estimation is a value judgment, as is the phrase "far too much emphasis". In the paper the author argues that the statements represent some serious misconceptions about risk. The purpose of the present paper is to point to these misconceptions and provide some guidance on how they can be rectified.

Environmental Impact Assessment Review, 2004

Assumption of risk — the notion that one cannot complain about a harmful state to which one has willingly exposed oneself — figures prominently in our extra-legal lived experience. In spite of its deep roots in our common-sense morality, the tort doctrine of assumption of risk has long been discredited by many leading tort scholars, restatement reporters, courts, and legislatures. In recent years, however, growing concerns about junk food consumption, and about obesity more generally, have given rise to considerations that are traditionally associated with the principles underlying the doctrine of assumption of risk. Against this backdrop, I shall advance two claims: one negative and the other affirmative. The negative claim is that the major objections to the doctrine of assumption of risk are either misplaced or overblown. And affirmatively, I argue that this doctrine (properly reconstructed to reflect liberal-egalitarian intuitions) can provide an illuminating framework with which to address pressing social concerns such as the one associated with junk food's harmful side-effects.

2013

Risk Analysis, 1996

In several European countries efforts are undertaken, in particular with regard to fixed industrial installations and transport of dangerous substances, to quantify the "societal risk" (SR) of accidents that may cause more than one victim at a time. This article explores the nature of such efforts. SR-models are essentially ways to structure the distribution of potential social costs of decisions about hazardous activities (e.g., costs of risk reduction, of land use forgone). First, the various ways to describe SR quantitatively, and to set limits to SR will be presented in short. Next, using a scheme developed by Fischhoff and colleagues, the various approaches will be placed in broad categories of reaching acceptable risk decisions: bootstrapping, formal analysis, and professional judgment. Each of the three categories offers a particular appreciation of the risks as 'external costs'. This has important political implications. In the discussion it is argued that local SR-limits, by the very nature of SR, should be set in a way that creates consistency with any potential supralocal interests involved. Second, particular attention is paid to the validity of claims that SR-limits should reflect a strong risk aversion.

BMJ quality & safety, 2012

1986

Journal of Experimental Psychology: Learning, Memory, and Cognition, 1983

Normative objections to expected utility theory raised by are rebutted, and a "fallacy of large numbers," discussed by , is analyzed from both mathematical and psychological standpoints.

Risk analysis : an official publication of the Society for Risk Analysis, 2012