Decisionmaking, Risk, and Uncertainty: An Analysis of Climate Change Policy

By Dholakia-Lehenbauer, Kruti; Elliott, Euel W. | The Cato Journal, Fall 2012 | Go to article overview

Decisionmaking, Risk, and Uncertainty: An Analysis of Climate Change Policy


Dholakia-Lehenbauer, Kruti, Elliott, Euel W., The Cato Journal


This article explores four questions. First, what theoretical frameworks help describe policy failure and success? Second, how might the decision that leads to failure or success be understood in terms of differing concepts of rationality and decisionmaking? Third, how does the discussion of risk and uncertainty as originally proposed by Frank Knight (1921) apply to a better understanding of both the first and second questions? Fourth, what is the relationship between serial and parallel processing and how are these administrative systems related to important aspects of the prior questions? Our chief contribution in this article is to show the ways in which these questions and their respective theoretical frameworks are interrelated as applied to one important contemporary policy question--climate change. We think our proposed integration of the various literatures offers important insights into the challenges policymakers face in deciding whether or not to adopt a particular policy.

The first question is based on the notion that decisionmakers can commit two fundamental types of policy errors: the wrong policy can be implemented or there can be a failure to implement the needed policy. Based on work by Heimann (1993), we construct a simple model of hypothesis testing using Type I versus Type II errors that is common in the social and behavioral sciences.

The second question is based on Vernon Smith's (2003) discussion of two fundamental types of decisionmaking: constructivist and ecological. The former approach, which has important similarities to expected unity theory, represents a highly deductive, top-down approach that places a high degree of confidence in model building and the ability to make accurate predictions about phenomena over extended periods. The latter represents a more bottom-up strategy that assumes decisionmakers do not have all encompassing information available to them and thus rely on heuristic models of decisionmaking. Such decisionmaking does not reject theory, but allows for theory-building to be done incrementally with ongoing adjustments of beliefs.

The third question provides an analytic framework for evaluating the probability of different kinds of events. Knight (1921) drew the important distinction between risk and uncertainty, and the consequences for understanding the probability of the occurrence or non-occurrence of particular events (see Raines and Jung 1992, Jarvis 2008). Risk refers to a calculated and predictable outcome, whereas uncertainty refers to an event for which the probability of outcomes is difficult to objectively measure. We believe that policymakers, as well as policy analysts, are all too likely to misinterpret one set of events for another, leading to faulty policymaking.

The final conceptual framework in which we examine the relevance of the forgoing issues to questions of administrative systems offers additional and important insights into the nature of decisionmaking in organizations. Ultimately, we think our analysis offers a roadmap for future research that will be of assistance to scholars and decisionmakers in better understanding decisionmaking and its consequences. In the following section, we discuss the desirability of policy action or inaction (Type I versus Type II errors). We then move to a comparison of constructivist as opposed to ecological decisionmaking and the distinction between Knightian risk and uncertainty in the subsequent two sections. We then apply our arguments to the issue of climate change.

To Act or Not to Act: The Nature of Policy Success or Failure

What is the nacre of policy success or failure? Many scholars have explored that question from the standpoint of what happens after a decision has been made. Our approach is somewhat different. Instead of asking how many resources are devoted to a policy or how principal-agent problems influence policy outcomes, we inquire about the fundamental nature of decisionmaking--that is, should one act or not act? …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Decisionmaking, Risk, and Uncertainty: An Analysis of Climate Change Policy
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.