Lecture 12 - Social RM cont

Lecture 12 - Social RM cont - Minimizing Social Cost of...

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    Minimizing Social Cost of Risk Societal COR =  Σ i [TCOR ] where “i” includes all citizens in society who are  affected by a risk firms and individuals
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    Role for Government When markets do not achieve socially optimal  risk level: Externalities (e.g. worker injury risk) Liability System Direct Regulation 
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    Pure Public Good Nonrival:  Once produced, no additional cost of another person  consuming it Non-excludable:   All consume it equally if it is provided Markets generally do not provide socially optimal  level of a public good
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    Public Goods and Government RM Public Goods (e.g. health and technology risks) Environmental pollution regulation Hazardous substance regulation Pre-marketing approval of products Climate change regulation
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    Difficulties in Societal RM Measuring Benefits and Costs Distributional Issues Risk Trade-Offs Dealing with Uncertainty Risk Perceptions of Consumers Thursday Today
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    Using Economic Policy Analysis Find each citizen’s willingness to pay for a  policy change. Sum across individuals to get aggregate 
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This note was uploaded on 05/07/2009 for the course PAM 4230 taught by Professor Tennyson during the Spring '07 term at Cornell.

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Lecture 12 - Social RM cont - Minimizing Social Cost of...

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