The policy consequences of cascade blindness

Adam Elga and Daniel M. Oppenheimer

Behavioural Public Policy, 2021, vol. 5, issue 2, 180-201

Abstract: One way to reduce waste and to make a system more robust is to allow its components to pool resources. For example, banks might insure each other or share a common capital reserve. Systems whose resources have been pooled in this way are highly prevalent in such diverse domains as finance, infrastructure, health care, emergency response and engineering. However, these systems have a combination of characteristics that leave them vulnerable to poor decision-making: non-linearity of risk; obvious rewards combined with hidden costs; and political and market incentives that encourage inadequate safety margins. Three studies demonstrate a tendency for managers of such systems to underestimate the probability of cascading failures. We describe a series of behaviorally based policy interventions to mitigate the resulting hazards.

Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:bpubpo:v:5:y:2021:i:2:p:180-201_3

Access Statistics for this article

More articles in Behavioural Public Policy from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().