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Economics of Health Risk Assessment

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  • Erik Lichtenberg

    () (Department of Agricultural and Resource Economics, University of Maryland, College Park, Maryland 20742-5535)

Abstract

The methods that scientific and technical experts have developed for constructing quantitative assessments of health and safety risks have major shortcomings as tools for decision analysis. We use a model of cost-effective risk management under uncertainty to discuss shortcomings of standard risk assessment methods as decision support aids, including problems of (a) comparability of risk estimates and costs of saving statistical lives from compounded conservatism and (b) lack of flexibility in modeling regulatory intervention. Offsets and risk shifting due to regulation-induced changes in firm and household behavior show that risk assessments need to incorporate economic and behavioral science models. Empirical studies demonstrate that the tools of economic analysis can help risk assessments generate much richer information sets both at the overarching level of embedding risk assessments in decision-theoretic frameworks for risk management decisions and at the internal level by giving risk assessments the capacity to capture the effects of behavioral changes on risk.

Suggested Citation

  • Erik Lichtenberg, 2010. "Economics of Health Risk Assessment," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 53-75, October.
  • Handle: RePEc:anr:reseco:v:2:y:2010:p:53-75
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-040709-135045
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    More about this item

    Keywords

    risk analysis; exposure assessment; dose-response estimation; compounded conservatism; cost of saving a statistical life; averting behavior; offsets; risk shifting;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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