Responsible Precautions for Uncertain Environmental Risks

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By: W. Kip Viscusi, Joel Huber, & Jason Bell

September 17, 2019

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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 bisphenol-A, 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 conservatism and “no-regrets” responses.

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This article is part of a working paper series convened by the GW Regulatory Studies Center. The other articles are also available from JBCA:

Nuclear War as a Global Catastrophic Risk - By: James Scouras

From Football to Oil Rigs: Risk Assessment for Combined Cyber and Physical Attacks - By: Tony Cox

Dynamic Benefit-Cost Analysis for Uncertain Futures - By: Susan E. Dudley,  Daniel R. Pérez, Brian F. Mannix, & Christopher Carrigan