Efficient Warnings, Not "Wolf or Puppy" Warnings

32 Pages Posted: 17 Sep 2016 Last revised: 7 Dec 2016

See all articles by Lisa A. Robinson

Lisa A. Robinson

Harvard University, Center for Health Decision Science; Harvard University, Center for Risk Analysis

W. Kip Viscusi

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

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: September 8, 2016

Abstract

Governments often require that products carry warnings to inform people about risks. The warnings approach, as opposed to the command and control approach to risk regulation, functions as a decentralized regulatory mechanism that empowers individuals to make decisions that take into account their own circumstances and preferences. Thus, individuals will be aware of the risks and the value of taking precautions, and they may avoid a product that others consume if they find the risk unacceptable. Ideally, warnings would allow individuals to assess both their personal level of risk and the benefits they will receive from another unit of consumption. Then those receiving positive expected benefits will consume more; those receiving negative net benefits will curtail their consumption.

Only Pangloss would be happy with the current warning system. It fails miserably at distinguishing between large and small risks; that is to say between wolves and puppies. Such a system is of little value, since people quickly learn to ignore a warning, given that puppies, which pose little danger, are many times more plentiful than wolves. When a wolf is truly present, people all too often ignore the warning, having been conditioned to believe that such warnings rarely connote a serious threat. We illustrate the clumsy-discrimination issue with examples related to cigarette labeling, mercury in seafood, trans fat in food, and California’s Proposition 65. We argue that the decision to require a warning and the wording of the warning should be designed in a manner that will lead consumers to roughly assess their accurate risk level, or to at least distinguish between serious and mild risks.

Empowering individuals to make appropriate risk decisions is a worthwhile goal. The present system fails to provide them with the requisite information.

Suggested Citation

Robinson, Lisa A. and Viscusi, W. Kip and Zeckhauser, Richard J., Efficient Warnings, Not "Wolf or Puppy" Warnings (September 8, 2016). HKS Working Paper No. RWP16-033. Available at SSRN: https://ssrn.com/abstract=2839311 or http://dx.doi.org/10.2139/ssrn.2839311

Lisa A. Robinson

Harvard University, Center for Health Decision Science ( email )

718 Huntington Avenue
Harvard T.H. Chan School of Public Health
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

Harvard University, Center for Risk Analysis ( email )

Harvard T.H. Chan School of Public Health
718 Huntington Avenue
Boston, MA 02115
United States

HOME PAGE: http://https://www.hsph.harvard.edu/lisa-robinson/

W. Kip Viscusi

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vanderbilt University - Department of Economics

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

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

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://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

Richard J. Zeckhauser (Contact Author)

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

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

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