Journal of Risk and Uncertainty

, Volume 27, Issue 1, pp 77–103

Decision-Making Under Scientific Uncertainty: The Economics of the Precautionary Principle

Authors

  • Christian Gollier
    • University of Toulouse
    • University of Toulouse
Article

DOI: 10.1023/A:1025576823096

Cite this article as:
Gollier, C. & Treich, N. Journal of Risk and Uncertainty (2003) 27: 77. doi:10.1023/A:1025576823096

Abstract

The Precautionary Principle has provided the foundations for building a new risk regulatory pattern under scientific uncertainty. This paper investigates how classical economic theory may, or may not, justify the Precautionary Principle. It examines the link between irreversibility, the prospect of increasing information over time and risk management. In doing so, it brings closer the notion of option value to that of precaution. Using a general modelling framework, it identifies the conditions so that the Precautionary Principle is an efficient economic guideline. It also explains why precautionary policies are not likely to emerge in a competitive economy or in the presence of a global pollution problem.

Precautionary Principleoption valuescientific uncertaintyirreversibility

Copyright information

© Kluwer Academic Publishers 2003