Responsible Precautions for Uncertain Environmental Risks

Journal of Benefit-Cost Analysis, Forthcoming

Vanderbilt Law Research Paper No. 19-20

32 Pages Posted: 13 Jun 2019

See all articles by W. Kip Viscusi

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

Joel Huber

Duke University - Fuqua School of Business

Jason Bell

Duke University - Fuqua School of Business

Date Written: May 13, 2019

Abstract

Uncertain future risks pose cognitive and analytical challenges to household decision makers. Risks with uncertain probabilities, coupled with potentially severe outcomes pose problems for decision making and are prone to overreactions. Imprecision in risk estimates generates behavioral distortions such as ambiguity aversion. This article presents new empirical results indicating household overvaluations of uncertain threats posed by several drinking water risks: traces of prescription drugs in drinking water, plastic water bottles with BPA, and the weed killer atrazine in drinking water. Negative reactions reflect responses to ambiguous risks, but policies driven by these concerns may misallocate regulatory resources due to risk conservativism and “no-regrets” responses.

Keywords: risk, ambiguity, discounting, BPA, atrazine, prescription drugs, drinking water risks

JEL Classification: D61, D81, K32, Q51, I18

Suggested Citation

Viscusi, W. Kip and Huber, Joel and Bell, Jason, Responsible Precautions for Uncertain Environmental Risks (May 13, 2019). Journal of Benefit-Cost Analysis, Forthcoming , Vanderbilt Law Research Paper No. 19-20, Available at SSRN: https://ssrn.com/abstract=3403178

W. Kip Viscusi (Contact Author)

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

Joel Huber

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7785 (Phone)

Jason Bell

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
10
Abstract Views
198
PlumX Metrics