eprintid: 19999
rev_number: 41
eprint_status: archive
userid: 2744
dir: disk0/00/01/99/99
datestamp: 2015-12-18 11:30:47
lastmod: 2016-04-11 09:32:46
status_changed: 2015-12-18 11:30:47
type: workingPaper
metadata_visibility: show
creators_name: Heyen, Daniel 
creators_name: Goeschl, Timo 
creators_name: Wiesenfarth , Boris 
title: Risk Assessment under Ambiguity: Precautionary Learning vs. Research Pessimism 
subjects: 330
divisions: 181000
keywords: scientific uncertainty; ambiguity; learning; risk assessment; precautionary principle; active information acquisition; regulatory mandates.
abstract: Agencies charged with regulating complex risks such as food safety or novel substances frequently need to take decisions on risk assessment and risk management under conditions of ambiguity, i.e. where probabilities cannot be assigned to possible outcomes of regulatory actions. What mandates should society write for such agencies? Two approaches stand out in the current discussion. One charges the agency to apply welfare economics based on expected utility theory. This approach underpins conventional cost-benet analysis (CBA). The other requires that an ambiguity-averse decision-rule - of which maxmin expected utility (MEU) is the best known - be applied in order to build a margin of safety in accordance with the Precautionary Principle (PP). The contribution of the present paper is a relative assessment of how a CBA and a PP mandate impact on the regulatory task of risk assessment. In our parsimonious model, a decision maker can decide on the precision of a signal which provides noisy information on a payoff-relevant parameter. We find a complex interplay of MEU on information acquisition shaped by two countervailing forces that we dub 'Precautionary Learning' and 'Research Pessimism'. We find that - contrary to intuition - a mandate of PP rather than CBA will often give rise to a less informed regulator. PP can therefore lead to a higher likelihood of regulatory mistakes, such as the approval of harmful new substances.
date: 2015-12
id_scheme: DOI
id_number: 10.11588/heidok.00019999
schriftenreihe_cluster_id: sr-3
schriftenreihe_order: 0605
ppn_swb: 1656065290
own_urn: urn:nbn:de:bsz:16-heidok-199999
language: eng
bibsort: HEYENDANIERISKASSESS201512
full_text_status: public
series: Discussion Paper Series, University of Heidelberg, Department of Economics
volume: 0605
place_of_pub: Heidelberg
pages: 32
citation:   Heyen, Daniel  ; Goeschl, Timo  ; Wiesenfarth , Boris   (2015) Risk Assessment under Ambiguity: Precautionary Learning vs. Research Pessimism.  [Working paper]     
document_url: https://archiv.ub.uni-heidelberg.de/volltextserver/19999/1/heyen_goeschl_wiesenfarth_2015_dp605.pdf