In recent years, there has been remarkable progress in our understanding of policy persistence, on the one hand, and of the psychological phenomenon of underreaction, on the other. Surprisingly, there has been no attempt to use robust findings, derived from these efforts, in order to understand the nuances of policy underreaction. Policy underreaction refers to systematically slow and/or insufficient response by policymakers to increased risk or opportunity, or no response at all. This article tries to give the concept of policy underreaction a robust analytical identity by integrating cognitive, social, psychological and emotional variables in the explanation of policy underreaction and by introducing a variation across different types of contextual sources of policy persistence as explanatory variables of this phenomenon. It develops an analytical framework that revolves around two key elements of decision making in situations of risk unfolding over time: (1) policymakers’ underestimation and accurate estimation of increased risks and (2) intra- and extra-organizational sources of policy persistence. Based on these dimensions, the article identifies and illustrates four distinct modes of policy underreaction which reflect differences in the nature of implemented policy.
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This article does not deal with situations of policy adjustment to constant risk, a reduction of risk and opportunities (such as scientific inventions).
I thank Raanan Sulitzeanu-Kenan for these formulations. Note that these formulations are equally applicable to policy overreaction, i.e., it may define any case of non-proportionate policy response, regardless of the level of activity. In this article, however, I delve into the mechanisms that generate different types of policy underreaction.
An example of the latter situation is LeBlanc et al. (2000) study which proposes that majority-rule legislatures will under-invest in public goods.
The same awareness of external constraints that exists in the case of forced underreaction exists also in a certain case of policy overreaction. In this case, rather than succumbing to constraints, policymakers deliberately ignore them, opting for overreaction no matter what. A reason for this may involve an adherence of policymakers to the Precautionary Principle, according to which even a small risk of a catastrophic outcome is enough to require a serious response (Sunstein 2007). A related explanation may be applied in cases other than worst-case scenarios, that is, when the likelihood and magnitude of risk is lower than that in worst-case scenarios (Sunstein 2007). It is based on the premises that responding to risk by policy underreaction, if perceived as such by the target populations, is not likely to change the status quo. The same outcome may be reasonably expected when policymakers respond in (what they perceive as) a proportionate manner, which may be wrongly perceived by the target populations as underreaction. By contrast, if policymakers aim at changing the status quo, policy overreaction at the core of the policy problem is likely to leave no room for interpretative error by the target populations regarding the intention of those who overreact.
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Earlier versions of this article were presented at the 2013 Annual Conference of the Israeli Political Science Association, Jerusalem; the Political Science Departmental seminar, Hebrew University, Jerusalem; the 2013 International Conference on Public Policy, Grenoble, France; the 2013 Comparative Agendas Project Meeting, Antwerp, Belgium; and the CARR/LSE public policy group seminar, May 2014. I would like to thank Raanan Sulitzeanu-Kenan, Allan McConnell and numerous seminar audiences for very insightful comments. I also thank Eitan Shamir, Yossi Kuperwasser, Ran Segev, Issac Devash and Ron Tira for helpful discussions. I would also like to thank the Policy Sciences editors, and two anonymous reviewers, whose comments and suggestions helped me improve this article. The usual caveat applies.
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Maor, M. Policy persistence, risk estimation and policy underreaction. Policy Sci 47, 425–443 (2014). https://doi.org/10.1007/s11077-014-9203-8