Risk Equity: A New Proposal

48 Pages Posted: 17 Apr 2007 Last revised: 21 Dec 2014

Abstract

What does distributive justice require of risk regulators? Various executive orders enjoin health and safety regulators to take account of "distributive impacts," "equity," or "environmental justice," and many scholars endorse these requirements. But concrete methodologies for evaluating the equity effects of risk regulation policies remain undeveloped. The contrast with cost-benefit analysis - now a very well developed set of techniques - is stark. Equity analysis by governmental agencies that regulate health and safety risks, at least in the United States, lacks rigor and structure.

This Article proposes a rigorous framework for risk-equity analysis, which I term "probabilistic population profile analysis" (PPPA). PPPA is both novel, yet firmly grounded in the social-welfare-function tradition in welfare economics. The PPPA framework conceptualizes both the status quo, and possible policies, as probability distributions across population profiles - where each population profile is, in turn, a concatenation of lifetime health-longevity-income histories, one for each member of the population. A utility function transforms each such profile into a utility vector. An equity-regarding social welfare function (SWF) is then specified. Policy analysts can employ the equity-regarding SWF both (1) to determine how policies compare purely as a matter of equality; and (2) to determine how they compare all-things-considered, considering both equality and overall welfare.

The proposal may seem utopian, but is not. Scholars in the field of optimal tax policy already use SWFs to evaluate policies. Characterizing policies as distributions across population health-longevity-income profiles builds on existing risk assessment and general-equilibrium-modeling techniques. Utility functions can be specified through survey research and, in the interim, by building on standard functional forms. Plausible normative axioms considerably narrow the possible forms of the SWF, and survey research or thought experiments narrow the field further. Part I of the Article describes and criticizes existing approaches to risk equity that have been proposed in the scholarly literature: the environmental justice conception of risk equity; "individual risk" approaches; QALY-based equity analysis; incidence analysis; inclusive equality measurement; and cost-benefit analysis with distributive weights. Part II describes and defends PPPA. PPPA has many virtues. It recognizes that well-being is multidimensional, a function of both income and health/longevity; furnishes a metric for inequality; provides a framework for making tradeoffs between equality and overall well-being; and understands that distributive justice includes (but is not limited to) inequalities between high and low-status social groups.

Keywords: risk, equity, distributive justice, inequality, environmental justice, health equity, QALY, social welfare, incidence analysis, cost-benefit analysis, risk assessment

Suggested Citation

Adler, Matthew D., Risk Equity: A New Proposal. Harvard Environmental Law Review, Vol. 32, p. 1, 2008; U of Penn, Inst for Law & Econ Research Paper No. 07-07; U of Penn Law School, Public Law Research Paper No. 07-18. Available at SSRN: https://ssrn.com/abstract=981003 or http://dx.doi.org/10.2139/ssrn.981003

Matthew D. Adler (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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