 Should policy be concerned with objective or subjective risks?No 93, Working Papers in Economics from University of Gothenburg, Department of Economics Abstract: Much psychological evidence suggests that people’s risk-perceptions are biased. This paper assumes that public policy should intrinsically be concerned with people’s expected welfare, rather than their preferences, which sometimes implies a degree of paternalism. Still, expected welfare depends on both objective and subjective risks. The latter are important through mental suffering associated with the risk, and through secondbest considerations in decentralized markets where people make their own choices between risky alternatives. Optimality rules for both public provision of risk-reducing investments, and for provision of (costly) information to reduce people’s risk-perception bias, are presented.
Keywords: Subjective risk; risk management; risk regulation; risk-perception; information provision; cost-benefit analysis; paternalism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hhs:gunwpe:0093 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working Papers in Economics from University of Gothenburg, Department of Economics Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden. Contact information at EDIRC. |
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