The implication of extreme events on policy responses

Urs Steiner Brandt

Journal of Risk Research, 2014, vol. 17, issue 2, 221-240

Abstract: This paper considers a situation where a real risk exists that requires precautions, but the public mostly experiences the risk through infrequently occurring extreme events; this type of risk includes risk from climate change, international terrorism, natural calamities or financial crises. The analysis shows that if a risk-mitigating policy is based on the perceived riskiness of that risk, it will call for disproportionate responses (compared to what the 'real' risk suggests) by either under- or over-investing in risk-reducing policies, depending on the characteristics of the problem, implying significant volatility in the policy response. This type of response provides at least three challenges to society: policy cycles where implementation lags behind the actual change in risk, a lock-in to inefficient technologies and additional costs. Finally, this paper addresses the question of how the above-mentioned challenges can be managed through proper risk communication.

Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1080/13669877.2013.794151

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