Some Implications of Cognitive Psychology for Risk Regulation

How costly is “clean”? An analysis of the benefits and costs of Superfund site remediations

“…The focus on individual risk levels in federal regulatory policies may arise from a similar scope effect in the demand for policies that involve risk reduction, so that regulators face demands to protect individuals against risk without regard to the number of individuals facing such risks. Risk biases such as this "scope effect" may thus influence the formation of risk policies, a topic explored more in Noll and Krier [1990]. Hird [1994] relates how factors associated with risk biases, such as "the degree of control of risk, the dread of risk, the catastrophic potential, its potential fatal consequences, and the inequitable distribution of risks," help generate support for the Superfund policies despite potential inefficiencies in the program (p. 215).…”

Economic analysis of the legal standard for deceit in English tort law

“…In other words, when determining whether the representor had the intention to deceive, the court will consider what the representor actually believed at the time of making the statement, rather than what a reasonable person would have believed in the position of the representor. To see the economic features of the subjective test of fraud, we need to consider it in relation to human cognitive limitations (Ulen 1989;Noll and Krier 1990).…”

Environmental disasters as risk regulation catalysts? The role of Bhopal, Chernobyl, Exxon Valdez, Love Canal, and Three Mile Island in shaping U.S. environmental law

“…Big shocks can "educate" the rationally ignorant voter, leading to pressure for legislative or regulatory reform (Kane 1996;Sunstein 2003). 8 This catalytic effect would be even larger if people believe in a "law of small numbers" (Noll and Krier 1990;Rabin 2002). People tend to overestimate low probability events and highly publicized events (Viscusi and Hamilton 1999).…”

“…The "normative analysis as a positive theory" of regulation would predict that voters would demand new regulation to address the apparent externality exposed by the recent disaster (Peltzman 1999;Keohane, Revesz and Stavins 1998). If voters are incensed by such disasters, then their congressional representatives may respond by holding hearings and enacting new risk legislation (Noll and Krier 1990). Polluting firms, such as Exxon or Union Carbide, may fear that their long run reputation will be hurt by the shock (Karpoff, Lott and Wehrly 2005).…”