Kahneman on the Precautionary Principle

In Daniel Kahneman’s Thinking, Fast and Slow, there is an interesting discussion of how moral intuitions behind the precautionary principle conflicts with efficient risk management:

The intense aversion to trading increased risk for some other advantage plays out on a grand scale in the laws and regulations governing risk. This trend is especially strong in Europe, where the precautionary principle, which prohibits any action that might cause harm, is a widely accepted doctrine. In the regulatory context, the precautionary principle imposes the entire burden of proving safety on anyone who undertakes actions that might harm people or the environment. Multiple international bodies have specified that the absence of scientific evidence of potential damage is not sufficient justification for taking risks. As the jurist Cass Sunstein points out, the precautionary principle is costly, and when interpreted strictly it can be paralyzing. He mentions an impressive list of innovations that would not have passed the test, including “airplanes, air conditioning, antibiotics, automobiles, chlorine, the measles vaccine, open-heart surgery, radio, refrigeration, smallpox vaccine, and X-rays.” The strong version of the precautionary principle is obviously untenable. But enchanced loss aversion is embedded in a strong and widely shared moral intuition; it originates in System 1 [the thinking fast system]. The dilemma between intensely loss-averse moral attitudes and efficient risk management does not have a simple and compelling solution[p. 351, italics in original].

I suspect similar morals lie behind the US Endangered Species Act, which actually prohibits any kind of risk management; any specie should be conserved at any cost. One of my favorite economists, Jason Shogren, have written extensively on the problematic aspects of the Endangered Species Act. In one of his memorable passages, he writes:

Essentially, the approach of the Act that prohibits any activity that harms a listed [endangered] species puts a very large or infinite value on avoiding extinction. This view places endangered species beyond the reach of economic tradeoffs, and the economist is relegated to helping find the least cost solution to achieve a biological-based standard [Brown and Shogren 1998, Economics of the Endangered Species Act, The Journal of Economics Perspectives, Vol. 12, No. 3, pp. 3-20, p. 10].


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