Academic journal article Review of Social Economy

Social Economics and Risk Analysis

Academic journal article Review of Social Economy

Social Economics and Risk Analysis

Article excerpt

The objective of this article is to apply the principles of social economics to an examination of the public policy potentials and pitfalls of risk analysis, especially comparative risk analysis. The first section introduces risk analysis and reviews four policy-relevant applications. The second section explores the public policy implications of risk analysis from the perspective of social economics. The third section assesses the potential for comparative risk analysis to provide a process for identifying environmental policy priorities through a less polarized, more participatory democratic process that addresses social as well as individual, poor as well as affluent, and future as well as present needs.

I. RISK ANALYSIS

Risk analysis is the study of the likelihood that an agent or hazard will produce an unwelcome event or outcome, and the severity of that outcome. One who measures these probabilities and outcomes is performing risk analysis. Generals and doctors have been in the risk analysis business for a very long time. Generals try to anticipate the enemy's reaction to an offensive, and doctors try to anticipate the course of a disease, adverse reactions to treatments, and other bad outcomes. Both are doing (sometimes crude) risk analysis. It has only been since about 1970, however, that risk analysis has developed into a distinct discipline. Traditionally, risk analysis measures the probability of death from a hazard. Contemporary risk analysis is concerned not just with the ultimate human harm, but with other undesirable human health, ecological health, and economic outcomes. The terms "hazard," "harm," and "undesirable outcomes" all imply value judgments. Although there is usually little disagreement that human death is a bad outcome, this assessment is nevertheless a value judgment. The more controversial the judgment that an outcome is bad, the more obvious it is that risk analysis requires value judgments.

As most economists are aware, "risk" implies that the universe of possible outcomes has been identified, and that the likelihood of each possible outcome is known (for the population at risk). Risk analysts, however, frequently lack reliable likelihood estimates, implying uncertainty rather than risk. And in attempting to analyze an agent's effect on human or ecological health, the possible outcomes are frequently unknown, suggesting ignorance (Vicusi 1990: 561). However, just as an economic forecaster "doesn't know that he doesn't know," we should not expect a professional risk analyst to admit to "uncertainty analysis" or "ignorance analysis." Despite the value judgment and data/knowledge shortcomings of risk analysis, demand for risk analysis continues to rise. Expanding material abundance has introduced many new risk agents, while that same process of wealth creation allows more resources to be allocated to risk reduction. Propelling this material growth are advances in basic science and their technological applications that produce an abundance of new materials and applications, generating additional risks as well as additional benefits.

Great strides have been made against many childhood and other diseases, yet public concern over health risks is at a fever pitch. Acute public concern is frequently dismissed by professionals as "irrational" and "paranoid," but researchers in psychology, sociology, and anthropology have had some success in explaining these attitudes. Psychologists have shown that risk perception is heavily influenced by various "dimensions" of risk, especially dread, uncertainty, catastrophic potential, voluntariness, familiarity, specificity, and controllability (Slovic 1987). By grouping these and other risk dimensions into degrees of risk across two broad categories, Paul Slovic and his colleagues have developed a simple model that helps to explain the mismatch of expert and public opinion [ILLUSTRATION FOR FIGURE 1 OMITTED]. "Dreaded Risk" (Factor 1) is the label attached to a group of related characteristics ("risk dimensions"), including uncontrollable, catastrophic, and involuntary. …

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