Elementary Economics for Non-Economist Risk Assessors

A shortcourse
to be held in conjunction with the

Society for Risk Analysis Annual Meeting

8 am - 12 noon
Sunday, 7 December 2003

Renaissance Harborplace Hotel
Baltimore, Maryland

This half-day continuing education course introduces non-economist risk assessors to some elementary economics concepts and helps explain how risk assessments are incorporated in benefit-cost analysis. A companion afternoon course on public choice in risk analysis is also provided (see http://www.ramas.com/public.htm).

Synopsis
Topic descriptions
Prerequisites
Speakers
Registration
Venue
More information
Related links

Synopsis

The use of benefit-cost analysis as an input to decision-making in risk regulation continues to intensify. Estimating the benefits of alternative regulatory actions generally requires risk assessments as inputs. Economists who work in risk analysis need to make a substantial and sustained effort to understand toxicology, epidemiology, and other sciences as they are employed in risk assessment. In turn, non-economist risk assessors can be more effective if they learn something about the economic paradigm. This halfday continuing education course introduces non-economist risk assessors to some elementary economics concepts and helps explain how risk assessments are incorporated in benefit-cost analysis. The instructors will focus on three fundamental economic principles. They will then apply these principles to a realistic but hypothetical risk assessment problem. By the end of the course, attendees will be able to understand the trade-offs inherent in any risk management problem using nothing more than a pen and a cocktail napkin, just like a real economist! As an added bonus, attendees will learn why the real “cost” of a decision is not dollars out of anyone’s wallet, but rather having to give up something else you really want.

Topics

This course will introduce non-economist risk assessors to two fundamental economics principles critical for understanding how benefit-cost analysis is applied to regulatory risk problems.

Opportunity cost. What does this concept mean? Why is it important? We will explain and illustrate by inviting class participants to decide for themselves how much ought to be spent to reduce or eliminate risk. Class members themselves will interactively choose which risks to control, and how much to control them. Economics is a study of tradeoffs, so attendees will learn how tradeoffs are made, why making tradeoffs is inevitable even if we’d really like to avoid them.
Marginal analysis. In every regulatory risk problem a great deal can be learned by understanding what economists call “the margin.” This not “the spread” in a Las Vegas betting line, nor is it how much cash your broker wants from you to cover your puts and calls. We will show that people apply marginal analysis in our everyday lives and that it is quite intuitive. We will do this not by managing a risk, but by purchasing a computer. We will extend this seemingly mundane example to show how there are numerous margins in every risk problem that can be adjusted to make better decisions

These two principles will be applied to a hypothetic risk problem that risk assessors and risk managers often face—deriving a Reference Dose (RfD) or Acceptable Daily Intake (ADI), or making a decision based on one of these values. We will show how the consideration of opportunity costs may lead a risk assessor to think differently about the derivation of such a value and enable a decision-maker to make different choices about how to manage risk. Knowing that specific examples are always helpful but they can create distracting controversy, the class will collaborate to decide on an RfD/ADI based on hypothetical data on a hypothetical chemical. We will finish by showing how the consideration of opportunity costs and marginal analysis can lead to improvements in public health not otherwise obtainable.

Prerequisites

None, except a spirit willing to venture into the unknown and previously unfathomable abyss of economic reasoning. A sense of humor is not essential, but highly recommended.

Speakers

The instructors for this course are all economists who have been deeply involved for many years in risk assessment, risk management, as well as the development and application of sound methods for benefit-cost analysis.

Richard B. Belzer

President, Regulatory Checkbook, Mt. Vernon, VA

Richard A. Williams

U.S. Food and Drug Administration, Director, Division of Market Studies, Center for Food Safety and Applied Nutrition, Food and Drug Administration, College Park, MD

Richard P. Theroux

Senior Economist, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC

John F. Morrall III

Chief, Human Resources and Housing Branch, Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC

Registration

The registration fee is $150 before 10 November, or $180 on site. You do not need to register for the Annual Meeting to attend the workshop. Registration will be handled by

Secretariat sra@burkinc.com
Society for Risk Analysis www.sra.org
1313 Dolley Madison Boulevard, Suite 402
McLean, Virginia 22101 USA
703-790-1745, fax 703-790-2672

Venue

The event will be held 8 am to 12 noon on Sunday, 7 December 2003, at

Renaissance Harborplace Hotel
202 East Pratt Street
Baltimore, Maryland 21202 USA
800-468-3571 (toll-free reservations)
410-547-1200 (direct to the hotel)

The room for the event has not yet been determined; check with the hotel concierge. To reserve a room at the hotel, call 800-468-3571 before 10 November 2003. Be sure to identify yourself as a SRA Annual Meeting attendee to receive the SRA group rate of $135 per night (single or double occupancy) plus 12.5% tax. Cancellations must be made at least 48 hours in advance. See a description of the hotel at http://www.marriott.com/dpp/PropertyPage.asp?MarshaCode=BWISH.

More information

More information can be obtained from Richard Belzer belzer@regulatorycheckbook.org, telephone 703-780-1850, fax 202-478-1626.