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Journal of Risk and Uncertainty

, Volume 27, Issue 1, pp 77–103 | Cite as

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

  • Christian Gollier
  • Nicolas Treich
Article

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 Principle option value scientific uncertainty irreversibility 

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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  1. 1.University of ToulouseToulouseFrance

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