This half-day workshop, sponsored by the Risk and Economics Specialty Group, will attempt to further our understanding of the development of health and safety regulations by integrating the insights of public choice economics and risk analysis. The public choice theory challenges the regulatory state by demonstrating that self-interested individuals may have private incentives to ‘pressure’ the regulatory state to develop regulations that create economic advantage for them, not strictly for the public interest. This is especially true when the economic benefits are concentrated in a distinguishable group, or when potential countervailing pressure groups are at a disadvantage in influencing the development of regulations, because the costs of regulation are diffuse or uncertain. The relevance of public choice economics, within a risk analysis framework, is that a successful risk analysis must incorporate the effects of private incentives and group pressures that can influence the adoption of the preferred regulation or policy. Because trade groups routinely lobby Congress to adopt or change regulations for economic advantage, a successful public risk analysis should account for private group pressures and private incentives. The workshop will highlight some of the problems associated with the current practice of risk analysis by providing participants with examples and case studies of safety policies that might have benefited from a closer attention to the divergence between private and public risks and incentives. The workshop will define private interest and public risk and examine the assumptions, uncertainty, and variability of private and public risks and costs, and the resulting implications for the development of regulations. The goal is to encourage participants to produce a new kind of “risk analysis” by using public choice insights to help generate new and better answers to risk policy questions that incorporate non-cooperation problems.
SynopsisThis workshop will attempt to further our understanding of the development of health and safety regulations by integrating the insights of public choice economics and risk analysis. The significance of public choice economics is its challenge to the traditional economic theory of the regulatory state. The traditional theory is that the regulatory state exists to provide public goods, including health and safety regulations that individuals cannot, or at can only with difficulty, provide for themselves. The public choice theory is that self-interested individuals may have private incentives to ‘pressure’ the regulatory state to develop regulations that create economic advantage for them, not strictly for the public interest. This is especially true when the economic benefits are concentrated in a distinguishable group, or when potential countervailing pressure groups are at a disadvantage in influencing the development of regulations, because the costs of regulation are diffuse or uncertain.
Risk analysis is the framework for the regulatory state to organize its risk assessments, risk management, cost-benefit analysis, and risk communication in order to reduce the public impact of risks, especially, health and safety risks. The relevance of public choice economics to risk analysis is that a successful risk analysis must incorporate the effects of private incentives and group pressures that can influence the adoption of the preferred regulation or policy. Because trade groups routinely lobby Congress to adopt or change regulations for economic advantage, a successful public risk analysis should account for private group pressures and private incentives.
Another, more general, concern of public choice economics is the divergence between private incentives and public outcomes, as described by the prisoner’s dilemma problem. The implication of the prisoner’s dilemma problem for public choice economics is that while everyone in a large group setting may prefer a particular public outcome, such as a health or safety practice, because of the free rider problem, individuals affected do not carry out the recommended activity. Everyone may agree that infected food handlers should not work during the period they are shedding an infectious pathogen. However, infected food handlers who agree for everyone else, might themselves continue to work rather than forgo their hourly income by not working. To these food handlers, the private cost of their foregone wages is greater than their share of the public benefit, undermining the benefit of the food safety practice. The prisoner’s dilemma is because the private incentives to not cooperate are greater than the pubic incentives to cooperate. A successful risk analysis must incorporate solutions to these kinds of free rider problems, prisoner’s dilemmas and other non-cooperation outcomes that can undermine the success of a regulation.
The workshop will begin by highlighting some of the problems associated with the current practice of risk analysis. The workshop will then provide participants with examples of safety policies that might have benefited from a closer attention to the divergence between private and public risks and incentives. The goal will be to encourage participants to produce a new kind of “risk analysis” that will use public choice insights to help generate new and better answers to risk policy questions that incorporate non-cooperation problems.
The workshop will be organized around one or more case studies. These case studies will illustrate the advantages of integrating risk analysis and public choice economics. The case studies will include discussions of the ways that unforeseen market or consumer behaviors, especially prisoners dilemmas, may lead to offsetting risks, thus making it difficult to predict the net effects of policies designed to reduce health and safety hazards.. The workshop will define private and public risk and examine the assumptions, uncertainty, and variability on private and public risk estimates, and the resulting implications for the development of regulations. Finally, the attendees will breakout into small groups in which they will have the opportunity, in the context of a case study, to formulate their own recommendations for integrating risk analysis and public choice economics.
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The registration fee is $125 before 10 November, or $155 on site. You do not need to register for the Annual Meeting to attend the workshop. Registration will be handled by
The event will be held 1:00pm-5:00pm on Sunday, 7 December 2003, at
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 can be obtained from Peter Vardon, Pvardon@cfsan.fda.gov, telephone 301-436-1830, fax 301-436 2626.
Society for Risk Analysis Annual Meeting http://sra.org/events.htm#annual
Society for Risk Analysis http://www.sra.org/