Risk Regulation Lessons from Mad Cows

Foundations and Trends in Microeconomics, Forthcoming

Vanderbilt Law and Economics Research Paper No. 13-34

HKS Working Paper No. 13-047

86 Pages Posted: 21 Nov 2013 Last revised: 16 Dec 2013

See all articles by Joseph E. Aldy

Joseph E. Aldy

Harvard Kennedy School; National Bureau of Economic Research; Resources for the Future; Harvard University - Harvard Kennedy School (HKS)

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - College of Arts and Science - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Date Written: December 6, 2013

Abstract

The mad cow disease crisis in the United Kingdom (U.K.) was a major policy disaster. The government and public health officials failed to identify the risk to humans, created tremendous uncertainty regarding the human risks once they were identified, and undertook a series of policies that undermined public trust. In contrast, the mad cow disease risk never became a major problem in the United States (U.S.). The lead time that the U.S. had in responding to the disease that was first identified in the U.K. assisted in planning the policy response to avert a crisis. The absence of a comparable U.S. crisis, however, does not imply that the U.S. risk management approach was a success. Until recently, there was no systematic assessment of the domestic risks of mad cow disease. Moreover, U.S. government agencies have never undertaken a comprehensive assessment of the benefits and costs of any U.S. regulation dealing with mad cow disease. The absence of a sound economic basis for policy is reflected in the United States Department of Agriculture’s (USDA) ill-considered decision to prohibit the private testing of beef for mad cow disease. This decision disadvantaged companies that sought such testing in order to comply with foreign testing regulations. In the absence of such testing, U.S. beef exports plummeted. One company that attempted to implement a testing program launched a legal challenge to the USDA prohibition and was unsuccessful. The policy failures in both the U.K. and the U.S. provide several lessons for regulating invasive species risks and dealing with emerging risks more generally. We conclude with a series of ten public policy lessons for dealing with similar emerging risks.

Keywords: mad cow disease, Creutzfeldt-Jacob Disease, vCJD, food safety, regulation, bovine spongiform encephalopathy, BSE, beef, meat safety

JEL Classification: I10, K32, D81, Q1

Suggested Citation

Aldy, Joseph E. and Viscusi, W. Kip, Risk Regulation Lessons from Mad Cows (December 6, 2013). Foundations and Trends in Microeconomics, Forthcoming, Vanderbilt Law and Economics Research Paper No. 13-34, HKS Working Paper No. 13-047, Available at SSRN: https://ssrn.com/abstract=2357088

Joseph E. Aldy

Harvard Kennedy School

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HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joseph-aldy

National Bureau of Economic Research

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Resources for the Future

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HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joseph-aldy

Harvard University - Harvard Kennedy School (HKS) ( email )

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W. Kip Viscusi (Contact Author)

Vanderbilt University - Law School ( email )

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Nashville, TN 37203-1181
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615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/bio/?pid=w-kip-viscusi

National Bureau of Economic Research (NBER)

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Vanderbilt University - College of Arts and Science - Department of Economics

Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://as.vanderbilt.edu/economics/bio/wkip-viscusi/

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://business.vanderbilt.edu/bio/w-kip-viscusi/

Vanderbilt University - Strategy and Business Economics

Nashville, TN 37203
United States

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