Cost-benefit analysis - an analytic tool that is growing ever more influential in helping determine which interventions to protect human health and the environment society will pursue - absolutely requires at least two different kinds of reliable, understandable, and accurate information. Risk analysts, drawing on information from the biological, physical, and engineering sciences, provide information that enables decision makers and the public to understand the nature, magnitude, and distribution of the harms to health and the environment that could be avoided. Society relies upon regulatory economists to explore - the other side of the coin - the cost to society of taking action to reduce particular risks. This project brings together experts in risk analysis, regulatory economics, and several other disciplines to explore whether estimation and communication methods used increasingly routinely to quantify risks can profitably be adapted for use on the ?cost side? of cost-benefit analysis.
The project team will focus on two aspects of risk analysis that have greatly improved this discipline in the past 20 years: the attention to quantifying uncertainty in risk, and the emphasis on exploring the inter-individual variation in the risks that different people face. Regulatory economists generally do not quantify uncertainty in cost as thoroughly as scientists do for risk, and are even less likely to consider the distribution of costs across affected groups of consumers, producers, workers, and others. The investigators will explore whether there are sound empirical or normative reasons for this asymmetry, and will develop econometric models for two regulatory programs in order to assess how decisions and public communication might change if more information about uncertainty and variability in costs were made available. A major portion of the project will involve psychometric survey research that will begin to complement the literature on risk perception with the analogous but unexplored issue of ?cost perception? ? that is, how do laypeople and experts process information about the costs of regulatory programs, and how might those perceptions change when the presentation is enriched with information on uncertainty and variability? The results of these investigations will improve the analytic basis for making cost-benefit decisions that are better informed by realistic estimates of both costs and risks, and that are more responsive to public values and perceptions. The project will also serve as a proving ground for collaborative research among risk scientists and regulatory economists, two groups that work on the same problems but generally do so without direct collaboration.
