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Formalization and Applications of the Precuationary Principle

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Author Info
Claude HENRY (Laboratoire dÕEconomŽtrie, Ecole Polytechnique, Paris)
Marc HENRY (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Depertment of Economics, Columbia University, New York)

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Abstract

A formalization of the Precuationary Principle is given here: We formalize scientific knowledge on the likelihood of events in the state space and the concepts of scientifically unambiguous events and acts. We gie a definition of non-precautionary social planner as a Savage Expected Utility maximizer who evaluates acts relativ to a baseline, called Òbusiness as usualÓ, and who disregards scientifically ambguous acts, and we show that, for a wide class of preferences for the representative agent, non-r-precautionary decision making is sub-optimal. A discussion of this formalization is given in the context of national and international debates on Precaution, in the fields of Climate Change, of WTO arbitrages, and of the safety regulations of chemical products.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2002009.

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Length: 19
Date of creation: 01 Feb 2002
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Handle: RePEc:ctl:louvir:2002009

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Related research
Keywords: Ambiguity; objectively unambiguous; precaution;

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Larry G. Epstein & Jiankang Zhang, 1999. "Subjective Probabilities on Subjectively Unambiguous Events," Carleton Economic Papers 99-18, Carleton University, Department of Economics. [Downloadable!]
    Other versions:
  2. Chichilnisky, G. & Heal, G., 1993. "Global Environmental Risks," Discussion Papers 1993_03, Columbia University, Department of Economics.
    Other versions:
  3. Timothy O'Riordan & Andrew Jordan, 1995. "The Precautionary Principle in Contemporary Environmental Politics," Environmental Values, White Horse Press, vol. 4(3), pages 191-212, August. [Downloadable!] (restricted)
  4. Adriana Castaldo & Massimo Marinacci, 2001. "Random correspndences as bundles of random variables," ICER Working Papers - Applied Mathematics Series 12-2001, ICER - International Centre for Economic Research. [Downloadable!]
  5. Epstein, Larry G, 1980. "Decision Making and the Temporal Resolution of Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 269-83, June. [Downloadable!] (restricted)
  6. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February. [Downloadable!] (restricted)
  7. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-48, September. [Downloadable!] (restricted)
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  8. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May. [Downloadable!] (restricted)
  9. Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity, and the Separation of Utility and Beliefs," Levine's Bibliography 7616, UCLA Department of Economics. [Downloadable!]
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  10. Ramon Casadesus-Masanell & Peter Klibanoff & Emre Ozdenoren, 1998. "Maximum Expected Utility over Savage Acts with a Set of Priors," Discussion Papers 1218, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  11. Sarin, Rakesh K & Wakker, Peter, 1992. "A Simple Axiomatization of Nonadditive Expected Utility," Econometrica, Econometric Society, vol. 60(6), pages 1255-72, November. [Downloadable!] (restricted)
  12. Gollier, Christian & Jullien, Bruno & Treich, Nicolas, 2000. "Scientific progress and irreversibility: an economic interpretation of the 'Precautionary Principle'," Journal of Public Economics, Elsevier, vol. 75(2), pages 229-253, February. [Downloadable!] (restricted)
  13. Arrow, Kenneth J & Fisher, Anthony C, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 312-19, May. [Downloadable!] (restricted)
  14. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December. [Downloadable!] (restricted)
  15. Ulph, Alistair & Ulph, David, 1997. "Global Warming, Irreversibility and Learning," Economic Journal, Royal Economic Society, vol. 107(442), pages 636-50, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcello Basili & Mauriziop Franzini, 2005. "The Avian Flu Disease: A Case of Precautionary Failure," Department of Economics University of Siena 454, Department of Economics, University of Siena. [Downloadable!]
  2. Geoffrey Heal, 2008. "Climate Economics: A Meta-Review and Some Suggestions," NBER Working Papers 13927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Geoffrey Heal & Bengt Kriström, 2002. "Uncertainty and Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 3-39, June. [Downloadable!] (restricted)
  4. Pauline Barrieu & Bernard Sinclair-Desgagné, 2003. "The Paradox of Precaution," CIRANO Working Papers 2003s-63, CIRANO. [Downloadable!]
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