SAfety Preferences for Health-related Industrial Risks – SAPHIR
The problem addressed
Industrial accidents may cause loss of life and limb as well as short- and long-term damages to
the environment. Both regulators and firms design policies to manage the risks of industrial
activities. One common standard to evaluate the performance of a specific safety policy is the
expected number of lives saved and injuries avoided. However, this standard fails to account for
important dimensions of risk. Indeed, it neither considers society’s preferences to avoid large
scale accidents, nor does it capture concerns over possible inequalities in the resulting
distribution of risk across individuals. For this reason, alternative standards have been
implemented, which typically require limiting the maximum probable loss or the maximum individual
risk rather than the expected loss. The imposition of any such standard reflects social norms and
values toward public safety. However, there seems to be a large gap between the theoretical
insights on safety preferences gained in welfare economics and operations research and the safety
standards actually implemented to manage health-related industrial risks.
Keywords:
values
preferences
risk aversion
safety standards
Research questions
The project aims to highlight the normative stands of presently used safety standards and show
how they relate to preferences for human and organizational safety. It will address the following
questions:
- What are the practical implications of the interactions between the utilitarian ethics and
duty ethics viewpoints on safety, and how have these interactions evolved over time?
- What
are (economic) motives for catastrophe and inequality aversion?
- How can one integrate
other safety preferences (e.g. for common fates) into a coherent decision-making scheme?
- How, if at all, can one reconcile such safety preferences with standard cost-benefit
assessments of regulatory policies?
Keywords:
regulatory policy
cost-benefit analysis
Scientific disciplines: economics
Expected outputs
The envisioned theoretical advancement will be of interest to scholars of welfare economics, operations research, safety engineering, and related disciplines. We will communicate our results in scientific papers, which we intend to submit to top-tier disciplinary journals. The second group of stakeholders will be decision-makers in industrial risk management, who will endorse an integrated and interdisciplinary perspective on the various safety standards in use. To disseminate this perspective, we intend to write a transfer publication in an interdisciplinary journal with broad outreach to practitioners in risk management. This approach should prove to be beneficial for both theorists and practitioners of industrial risk management.
Keywords:
risk managers
decision-makers
Workplan
The proposed project will bring together an interdisciplinary team of researchers in
order to address the above research questions in a coherent way. The project will comprise three
tasks:
- Literature review. The first task will be the conduct of an
extensive literature survey on public preferences for safety and on the safety standards in use.
This is more challenging than one might be tempted to believe as the various disciplines
contributing to this literature (law, economics, actuarial science, operations research,
engineering, etc.) are dispersed and make use of different vocabulary and methods. The survey
shall serve as starting point for the theoretical analysis and will result in a review paper that
summarizes the state of knowledge in the different disciplines.
- Theoretical analysis.
In the second task, we will study the relationship between unequally distributed and correlated
risks and different preferences for public safety.
- Policy implications. The third
task will summarize findings from the literature review and our theoretical analysis in order to
spell out the policy implications of specific safety standards. In the spirit of Adler et al.
(2012), we will analyze their (in)compatibility with the cost-benefit approach commonly used to
assess health risk regulations and address contradictions that may arise from their joint
application. Based on a number of case study examples and the results of tasks 1 and 2, we shall
provide practical recommendations for policy makers on the design of safety standards. These will be
communicated in the form of a transfer publication in an interdisciplinary
journal.
Associated deliverables
In light of climate change and other existential threats, policy commentators sometimes suggest that society should be more concerned about catastrophes. This document reflects on what is, or should be, society’s attitude toward such low-probability, high-impact events. The question underlying this analysis is how society considers a major accident that leads to a large number of deaths; a large number of small accidents that each kill one person, where the two situations lead to the same total number of deaths.
We first explain how catastrophic risk can be conceived of as a spread in the distribution of losses, or a “more risky” distribution of risks. We then review studies from decision sciences, psychology, and behavioral economics that elicit people’s attitudes toward various social risks. This literature review finds more evidence against than in favor of catastrophe aversion.
We address a number of possible behavioral explanations for these observations, then turn to social choice theory to examine how various social welfare functions handle catastrophic risk. We explain why catastrophe aversion may be in conflict with equity concerns and other-regarding preferences. Finally, we discuss current approaches to evaluate and regulate catastrophic risk, with a discussion of how it could be integrated into a benefit-cost analysis framework.
Download deliverable
Participating researchers
Christoph Rheinberger
(Toulouse School of Economics, University of Toulouse,
France)
Nicolas Treich
(LERNA, University of Toulouse,
France)
— project coordinator
Olga Spackova
(Engineering Risk Analysis Group, Technical University München,
Germany)
Daniel Straub
(Engineering Risk Analysis Group, Technical University München,
Germany)
Carole Bernard
(Chair of Mathematical Statistics, Technical University München,
Germany)
Funding organizations
MEDDE (France)
FonCSI (France)
Information last updated on 2016-07-21.
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