Law and Economics Paper #5
Is it really better to be safe than sorry? The Precautionary Principle presupposes that there is lack of sufficient information to form a rational basis for avoiding risks. Hence, even if the probability of an unfavorable outcome for a certain event is low, the high level of impact of this event necessitates aggressive means of caution or avoidance.
The flaw in this Principle would be the very premise it operates on: lack of sufficient information. Information on all ramifications of a new experiment could be costly and hence, government policy dictates the application of the precautionary principle. I agree with Sunstein when he said in his paper that the precautionary principle is basically useless. Aside from hindering growth, the precautionary principle also disseminates incorrect information. The decision to avoid all risks is basically anchored on the whims of policy makers. Hence, an aggressive campaign against harmful emissions may not necessarily do away with other environmental problems.
Although the precautionary principle's aim is to avoid all risks with high impact, such avoidance of risks is made without looking at the bigger picture. Take cybercrime for instance. The impact of someone hacking into the Department of National Defense mainframe could have deleterious consequences for the whole nation. Does this possibility necessitate a government movement for denial of internet service from the rest of the world? Another example would be the sudden popularity of canola oil over its local counterpart, coconut oil over a decade ago. It was thought that coconut oil was high in cholesterol and harmful to health. It was only a couple of years ago when numerous studies conducted proved that coconut oil was healthier than canola and that the risks attached to canola oil (from canola being mostly genetically modified to be pest resistant) were higher.
From an economic point of view, the precautionary principle is far from being efficient. It makes no sense to totally prohibit an action for the mere low probability of the happening of a high impact event when benefits from this action grossly outweigh the disadvantages. Human behavior is more averse to the possibility of loss than to that of gain. But then, if the gain involves the creation of a means to prevent present losses or inefficiencies, would it not be better to take the risk? Even if the government applies the precautionary principle to some fields, it totally turns a blind eye to others. Hence, the low probability of a high impact unwanted event still exists, but is not seen. What happens then if the unwanted event happens?
A better option would be to encourage a new field (formerly subsumed under the precautionary principle) and if there are any fears surrounding its implementation, to create safeguards or countermeasures in case that 1% probability of an unwanted event happening does indeed happen. This would be a better option that just throwing darts while blindfolded.
The flaw in this Principle would be the very premise it operates on: lack of sufficient information. Information on all ramifications of a new experiment could be costly and hence, government policy dictates the application of the precautionary principle. I agree with Sunstein when he said in his paper that the precautionary principle is basically useless. Aside from hindering growth, the precautionary principle also disseminates incorrect information. The decision to avoid all risks is basically anchored on the whims of policy makers. Hence, an aggressive campaign against harmful emissions may not necessarily do away with other environmental problems.
Although the precautionary principle's aim is to avoid all risks with high impact, such avoidance of risks is made without looking at the bigger picture. Take cybercrime for instance. The impact of someone hacking into the Department of National Defense mainframe could have deleterious consequences for the whole nation. Does this possibility necessitate a government movement for denial of internet service from the rest of the world? Another example would be the sudden popularity of canola oil over its local counterpart, coconut oil over a decade ago. It was thought that coconut oil was high in cholesterol and harmful to health. It was only a couple of years ago when numerous studies conducted proved that coconut oil was healthier than canola and that the risks attached to canola oil (from canola being mostly genetically modified to be pest resistant) were higher.
From an economic point of view, the precautionary principle is far from being efficient. It makes no sense to totally prohibit an action for the mere low probability of the happening of a high impact event when benefits from this action grossly outweigh the disadvantages. Human behavior is more averse to the possibility of loss than to that of gain. But then, if the gain involves the creation of a means to prevent present losses or inefficiencies, would it not be better to take the risk? Even if the government applies the precautionary principle to some fields, it totally turns a blind eye to others. Hence, the low probability of a high impact unwanted event still exists, but is not seen. What happens then if the unwanted event happens?
A better option would be to encourage a new field (formerly subsumed under the precautionary principle) and if there are any fears surrounding its implementation, to create safeguards or countermeasures in case that 1% probability of an unwanted event happening does indeed happen. This would be a better option that just throwing darts while blindfolded.
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