Innovation and the precautionary principle

Caroline Orset ()

Economics of Innovation and New Technology, 2014, vol. 23, issue 8, 780-801

Abstract: Recent environmental policies favour the polluter pays principle. This principle points out the pollutant financial liability for the eventual incidents induced by his activities. In this context, we analyse the decision of an agent to invest in new industrial activities, the consequences of which on human health and the environment are initially unknown. It is not possible for him to delay investing, but the agent has the opportunity to acquire information and to reduce the cost of an accident. This allows the agent to reduce uncertainty regarding dangers associated with the project and to limit potential damages that it might cause. However, the agent's chosen level of these actions may be considered as insufficient and not acceptable by society as response in the face of a possible danger. Precautionary state regulation may then be introduced. We appreciate that this regulation may slow down innovation and may favour innovation in countries with less safety requirements. We find that the agent may get around the goal of the regulation by ignoring the information on the dangerousness of its project. We then propose some policy tools which stimulate innovation and impose a certain level of risk considered as acceptable for society to the agent. Finally, we use a numerical analysis based on the Monsanto Company for studying the agent's behaviour with different regulatory frameworks.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/10438599.2014.907667 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Innovation and The Precautionary Principle (2014)
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:taf:ecinnt:v:23:y:2014:i:8:p:780-801

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/GEIN20

DOI: 10.1080/10438599.2014.907667

Access Statistics for this article

Economics of Innovation and New Technology is currently edited by Professor Cristiano Antonelli

More articles in Economics of Innovation and New Technology from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().