Economics of Health Risk Assessment

Posted: 19 Oct 2010

See all articles by Erik Lichtenberg

Erik Lichtenberg

University of Maryland - College of Agriculture & Natural Resources

Date Written: October 2010

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

Lichtenberg, Erik, Economics of Health Risk Assessment (October 2010). Annual Review of Resource Economics, Vol. 2, Issue 1, pp. 53-75, 2010, Available at SSRN: https://ssrn.com/abstract=1694348 or http://dx.doi.org/10.1146/annurev-resource-040709-135045

Erik Lichtenberg (Contact Author)

University of Maryland - College of Agriculture & Natural Resources ( email )

0108 Symons Hall
University of Maryland
College Park, MD 20742-5551
United States

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