Decision-analytic refinements of the precautionary principle

In public decision making about uncertain technological hazards, the precautionary principle calls for prompt protective action rather than delay of protections until scientific uncertainty is resolved. The precautionary principle has a sound basis in decision theory, particularly in situations where the potential hazards are serious and the costs of protective actions are tolerable. This article suggests that the precautionary principle should be refined to address three complications: (1) situations where the exposures to be reduced or prevented may have beneficial as well as hazardous consequences; (2) situations where the protective action itself will create potential hazards; and (3) situations where targeted research investments, coupled with delay of protective action, are likely to support wiser public decisions than prompt protective action. Each of these complications is shown to be relevant to contemporary policy debates about application of the precautionary principle. The usefulness of the precautionary principle in public decision making will be enhanced if these decision-analytic refinements are adopted in formal definitions of the principle.     

The precautionary principle and EMF: implementation and evaluation

The precautionary principle, a recommendation to consider action to avoid a possible harm even if it is not certain to occur, is variously defined and interpreted. We present a range of definitions with an emphasis on their requirements for strength of evidence of harm and for actions to be taken. We describe the variety of approaches that have been adopted in developing policy to address the issue of possible health effects of electric and magnetic fields (EMF) in the face of scientific uncertainty. Further, we discuss specific aspects of scientific uncertainty regarding EMF health risks particularly relevant to the development of precautionary principle policy. We define and discuss prudent avoidance and other unique features of applications of the precautionary principle to EMF. We conclude with examples from EMF policy decisions of risk tradeoffs that need to be considered in developing any precautionary principle policy, and provide recommendations for better ways to define and implement the precautionary principle.     

The precautionary principle: an 'unprincipled' approach to biotechnology regulation

A tenet of administrative law, particularly in the United States, is that regulators must base their decisions on 'intelligible principles' to provide consistency, predictability, transparency and accountability. The precautionary principle, which purports to provide a new decision rule for making environmental decisions under conditions of uncertainty, fails to provide such an intelligible principle for making decisions. The precautionary principle is ambiguous on the use of the two major criteria currently used to make environmental decisions - significant risk and cost-benefit balancing - yet offers no new specific decision criteria in their place. The second fundamental problem with the precautionary principle is that it is based on the unsubstantiated premise that the current regulatory system is insufficiently protective. The current system already tends to err on the side of the safety, as it should, but the relevant question is just how precautious should we be? As illustrated by the example of genetically modified organisms, the prudent level of precaution depends on factors such as the magnitude, distribution and uncertainty of risks, the extent of exposure, and the trade-offs and lost benefits in foregoing the risk. These are precisely the factors that are considered under the current risk-based approach, which the precautionary principle seeks to replace.     

Risk-based decision analysis in support of precautionary policies

A decision-analytic model for avoiding a risky activity is presented. The model considers the benefit and cost of avoiding the activity, the probability that the activity is unsafe, and scientific tests or studies that could be conducted to revise the probability that the activity is unsafe. For a single decision maker, thresholds are identified for his or her current subjective probability that the activity is unsafe. These thresholds indicate whether the preferred course of action is avoiding the activity without further study, engaging in the activity without further study, or conducting a test or research programme to obtain additional information and following the result. When these thresholds are low, precautionary action is more likely to be warranted. When there are multiple stakeholders, differences in their perceptions of the benefit and cost of avoidance and differences in their perceptions of the accuracy of the additional information provided by the test or research programme combine to create differences in their decision thresholds. Thus, the model allows for the rational expression of differences among parties in a way that highlights disagreements and possible paths to conflict resolution. The model is illustrated with an application to phytosanitary standards in international trade and examined in terms of recent empirical research on lay perceptions of risks, benefits, and trust. Further research is suggested to improve the elicitation of model components, as a way of fostering the legitimate application of risk-based decision analysis in precautionary policy making.     

Buffer stocks and precautionary savings with loss aversion

This paper reexamines buffer stocks and precautionary savings in the presence of loss aversion. We assume that agents are disappointment averse, as in Gul [Econometrica, 59 (1991) 667–686]. We show that the concavity of the marginal utility continues to determine precautionary saving, but its effect is of a second order magnitude (proportional to the square of the coefficient of variation) compared to the first order effect (proportional to the coefficient of variation) induced by loss aversion. We show that a stabilization fund that is rather small when agents are maximizing the conventional expected utility, turns out to be rather large with loss aversion.     

Genetically modified plants and the precautionary principle

The European regulation of genetically modified plants is a particular example of technological risk management that has become an essential part of the management of change. The role of regulators in this management process, when there are demands for regulatory action concerning unquantified (and sometimes unquantifiable) technological risks – with regulation under conditions of uncertainty – is explored. Where the retrospective evidence concerning a postulated risk scenario is sparse, the precautionary principle (PP) may be invoked. The origins of the European regulatory system, which applied until 17 October 2002 (Directive 90/220), why this has been revised (Directive 2001/18) and the probable impact of this revision are described. This is illustrated with risk assessments that have accompanied submissions for marketing approval for genetically modified plants under Directive 90/220. Some of the problems associated with the PP and the regulation of GM plants are discussed.     

Forms of talk in policy dialogue: distinguishing between adversarial and collaborative discourse

Uncertainty, the precautionary principle and scenario are three important concepts in current regulatory debates concerned with risk management. In this paper, each concept is described in relation to its regulatory context and a linkage between the three concepts is established. Three scenarios relating to increasing scientific and technical uncertainty are presented. The most obvious regulatory approach to uncertainty is to ban a product, process or substance under the aegis of the precautionary principle. However, this may not be appropriate in all cases and a range of other possible policy responses to uncertainty are discussed and avenues for further research suggested.     

Appraising the precautionary principle – a decision analysis perspective

The public and regulators are naturally concerned about any decision that has uncertain but potentially serious health and environmental consequences. When facing such decisions, some individuals say we should resolve significant uncertainties before taking expensive action that may be unnecessary. Others support the precautionary principle, which says that policy makers should err on the side of caution by acting now to avoid or limit potentially detrimental consequences. This paper appraises the precautionary principle from a perspective decision analytic point of view. We argue that neither the 'resolve uncertainties before taking action' nor the 'act now on the side of caution' are appropriate as general policies for all environmental decision problems. Instead, we conclude that policy makers need to conduct sound, in-depth analyses to resolve the pros and cons of acting now versus conducting more research on a case-by-case basis.     

Housing returns,precautionary savings and consumption: Micro evidence from China

We investigate how changes in home prices affect consumption in China via a wealth channel. Examining a panel of 7955 households via fixed effects and instrumental variable methods, we find a marginal propensity to consume out of housing wealth (home-price MPC) that is concentrated on goods consumed for pleasure rather than necessity. This trend is driven by the value of second homes rather than that of primary residences, suggesting a wealth channel. We further examine whether returns on housing investment, including rental income and home appreciation, fund the wealth channel; however, we find little supporting evidence. In contrast, a reduction in health risk increases the home-price MPC, but a reduction in income risk that also relieves precautionary saving motives does not. Our results are robust to alternative data, common-factor progress, expenditure shocks and bequest motives. We contribute by examining second homes, which carry little of the dual nature of housing that primary residences do, to identify a controversial wealth channel, and by studying the relative effects of health and income risks on the wealth channel.     

Self-Protection, Information and the Precautionary Principle

In this paper we examine the effect of information on investment in self-protection. We show that the relationship between more information and investment in self-protection is ambiguous in general. If absolute risk aversion is constant, then investment in self-protection always decreases with a better information structure. We show that if we interpret the Precautionary Principle as requiring more self-protection today, it is difficult to accept it on the grounds of efficiency, except for a particular subset of information structures.     

France: broadening precautionary expertise?

Since 1997 France has had an intensified public controversy about the commercialization of GM crops. As new protagonists have entered the debate and raised new issues with the experts, the uncertainties (related to agronomic, environmental and human health consequences) have tended to increase and the previous standards of precaution have been challenged as inadequate. Public controversy has focused on the inability of the regulatory advisors to take into account scientific studies from disciplines other than molecular biology (such as ecology), as well as the agricultural model that underlies plant biotechnology. In response, the French government has begun to open up the regulatory process in order to involve citizens, NGOs and scientists within the official expert structures. Indeed, the French committee for biovigilance was set up in 1998 to provide a wide participation of the various stakeholders. Thus the French public controversy becomes a space where plant biotechnology is subjected to a social assessment.     

Does economic policy uncertainty raise corporate precautionary cash holdings? Evidence from China

Using China as the research setting, this paper investigates the relationship between economic policy uncertainty and corporate precautionary cash holdings. Empirical results show a U-shaped relation between economic policy uncertainty and corporate precautionary cash holdings. Empirical analysis, in terms of ownership structure, firm size, corporate competitiveness and geographical location, further shows that (i) the effects for economic policy uncertainty in both state-owned and non-state-owned enterprises are significant, but the effect is stronger for state-owned enterprises; (ii) such significant effect is also found more strongly in small and medium-sized enterprises and highly competitive enterprises; and (iii) the effects for eastern, central and western China are all statistically significant, but the effect is strongest for eastern China.     

Commentary: Morality and workability ­ a rejoinder to O'Riordan

This paper is about understanding the rhetoric of precaution and the practice of decision-making in areas of environmental controversy. It untangles the rhetoric, as established in documented agreements referring to precaution, from the constituent ideas that embody it, as characterized by those who deliberate on its application. By analysing the ways in which the rhetoric of precaution is framed within these documents it is possible to identify different elements that make up the principle in theory. By focussing on the constituent ideas behind the precautionary principle it is possible to move forward from the stalemate of rhetoric that could become the focus of attention itself.     

Technocratic precautionary principle: Korean risk governance of mad cow disease

This study investigates the multiplicity of sciences and the assemblage of technocracy with the precautionary principle (PP) in the Korean risk governance of mad cow disease (Bovine Spongiform Encephalopathy [BSE]). It conducts a policy typological analysis and a sociocultural analysis of the PP. Korean BSE policies are built on the technocratic PP. This principle emphasizes the scientific evidence of risk, although taking precautionary policy actions against BSE. This principle led to the absence of a total BSE inspection, a specified risk material policy for Korean cattle, a Hazard Analysis and Critical Control Point policy for beef processing and circulation, and an animal feed ban on nonruminants. Moreover, the BSE debate is not one about a unified science vs. a unified PP, but rather it concerns complex struggles between PPs in alliance with different sciences.     

Precautionary principle and discursive strategies: classifying and managing risks

The paper covers an integral risk concept consisting of a criteria-based risk evaluation, a novel proposal for risk classification and corresponding risk management strategies aimed at an analytic-deliberative approach in risk regulation. For this purpose, technical and scientific as well as social scientific concepts were integrated into a single conceptual framework. Eight criteria were selected for evaluating risks: probability of occurrence, extent of damage, incertitude, ubiquity, persistency, reversibility, delay effect and potential of mobilization. With respect to these criteria, six risk classes were formed in which risks may exceed thresholds determined by deliberative action. Effective and practicable management strategies were deduced for each risk class. The characterization and classification of risks provide a knowledge base for designing risk policies and class-specific management strategies. Three major management categories were identified: risk-based, precautionary and discursive strategies. In deliberative processes actors need to agree on norms and procedures to manage risks. If the results reflect the agreement of previous discourse procedures, political decisions become more legitimate. Because the risk evaluation, risk classification and management strategies are based on the concept of analytic-deliberative processes, the essential requirements for an effective and democratic risk policy are met.     

Choosing between precautions for nanoparticles in the workplace: complementing the precautionary principle with caring

Workers who develop and use nanoparticles are on the front line of exposure to the purported risks of nanoparticles. Employers have a legal duty to protect their employees against any work-related harm. However, it is difficult to perform the required risk assessment and management when dealing with uncertainty. Risk ethicists have therefore argued for using the precautionary principle to guide such decisions on uncertain risks. In this paper, I argue that if we want to make use of innovative products, such as nanomaterials, but lack the knowledge and shared standards for choosing between protective measures, the precautionary principle is underdetermined. For the use of nanoparticles in working environments, there are several guidelines that suggest different precautionary strategies for dealing with their purported risks, but choosing between these guidelines proves difficult in the absence of a clear, scientific, decision principle. I therefore explore the ethics of care to develop a complementary decision criterion for the precautionary principle. From this perspective, the caring qualities of working relationships are key in comparing precautions with each other. I propose three conditions for assessing risk management strategies based on (1) the existence of a mutual concern for employee health and safety, (2) the connectedness and continuity of the relationships between employer and employee, and (3) the responsiveness of employers to employee needs. Using these criteria will support choosing between precautions, by shifting attention from the acceptability of imposing a risk to creating a social context in which the imposition of the residual risks can be considered acceptable.     

The influence of the precautionary principle on science-based decision-making: questionable applications to risks of radiofrequency fields

The precautionary principle, recognized by the European Commission as a 'full-fledged and general principle of international law,' has been advanced as a paradigm for response to potential risks to the environment or health when scientific data are uncertain. But lacking the elements and operational qualities that characterize principles that have proven useful in law, politics, science, and ethics, the precautionary principle lends itself to regulation based on the perception of a threat or fear itself. In the absence of scientific evidence for risk, recent application of the precautionary principle to questions about radiofrequency electromagnetic fields of cellular telephones and cellular telephone base stations has produced wasteful and misguided regulations and questionable advice to the public. The formation of scientific 'fire brigades' is suggested for rapid acquisition of targeted scientific data needed so that precautionary policies on technologically driven issues can be based on quantitative risk assessment.     

New development: A new principle—the higher the position,the broader the view

ABSTRACT

The Peter Principle, introduced over 50 years ago, refers to an organizational phenomenon where employees in a hierarchy are promoted to positions for which they are not well qualified (Peter & Hull, 1969). It has been a topic of debate and empirical research in organizational theory and management literature ever since. This article does not seek to prove or disprove the Peter Principle. Rather, it provides an alternative explanation of promotion within an organization based on employee experience. The research presented here demonstrates that the role inhabited by an employee greatly influences their perspective, which may change based on their location within an organizational hierarchy. In other words, people’s horizons depend on their place within that hierarchy.     

Poxvirus‐vectored Vaccines Call for Application of the Precautionary Principle

Genetically engineered viruses (GEVs) used as live vaccines are, and will increasingly become, important for prevention of disease in human as well as animal populations. Poxviruses have a number of attractive theoretical and practical advantages as gene expressing vaccine vectors: their large genomes render construction of multivalent vaccines feasible, the vaccines are easy to produce, the virus particles are very thermostable, and inoculation is followed by long‐lasting, protective immune responses. On the other hand, administration and environmental release of GEVs may represent potential unintended harms to human, animal and ecosystem health. We will argue that a strict application of risk‐cost/benefit analyses do not cope appropriately with the current lack of scientific understanding and the complexity of ecosystems that will become GEV recipients, and fail to take into account the deeper ethical groundings that shape the scientific and public opinions. To avoid serious, unintended ecological effects of GEVs, it may be necessary to elaborate the ethical basis for protecting health and the environment. The Precautionary Principle (PP) may provide a basis for adequate consideration of ecological and ethical issues of vital importance to protection of health and environment from unforeseen adverse effects of poxvirus‐vectored vaccines. To operationalise the PP, we suggest that there is a need to identify and systematise lack of scientific understanding, and to acknowledge uncertainty by initiating research with a broad focus involving interdisciplinary research. In this paper we present three main issues related to the employment of the PP: i) identification of scientific uncertainty and its ethical significance in risk assessment and risk management processes, ii) the need for broad risk assessment as a response to scientific uncertainty, and iii) the need for transparency and public involvement to enhance the debate about normative standards concerning acceptability of benefits, risks and uncertainty with regard to GEV use and release.     

The principle of not feeling the boundary for the SABR model

The stochastic alpha–beta–rho (SABR) model is widely used in fixed income and foreign exchange markets as a benchmark. The underlying process may hit zero with a positive probability and therefore an absorbing boundary at zero should be specified to avoid arbitrage opportunities. However, a variety of numerical methods choose to ignore the boundary condition to maintain the tractability. This paper develops a new principle of not feeling the boundary to quantify the impact of this boundary condition on the distribution of underlying prices. It shows that the probability of the SABR hitting zero decays to 0 exponentially as the time horizon shrinks. Applying this principle, we further show that conditional on the volatility process, the distribution of the underlying process can be approximated by that of a time-changed Bessel process with an exponentially negligible error. This discovery provides a theoretical justification for many almost exact simulation algorithms for the SABR model in the literature. Numerical experiments are also presented to support our results.