Acting in the Darkness: Towards some Foundations for the Precautionary Principle

Louise Guillouet and David Martimort

No 23-1411, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Invoked to guide actions under irreversibility, uncertainty and limited information, the Precautionary Principle states that decision-makers should act cautiously unless the consequences of acts are known. We consider a setting where the stock of past actions, passed a tipping point which remains unknown, increases the probability of a catastrophe. When past acts are observable, decision-makers can reconstruct the whole evolution of stock and beliefs and follow an optimal trajectory. Otherwise, and in accordance with the Precautionary Principle, they act cautiously, remaining too optimistic on their ability to delay the tipping point. This suboptimal behaviour has minor consequences on welfare.

Keywords: Precautionary Principle; Environmental Risk; Tipping Point; Uncertainty and Irreversibility (search for similar items in EconPapers)
JEL-codes: D83 Q55 (search for similar items in EconPapers)
Date: 2023-02-27, Revised 2024-07
New Economics Papers: this item is included in nep-cta, nep-env and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:127911

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