On the Meaning of the Preponderance Test in Judicial Regulation of Chemical Hazard

As usually defined, the preponderance test is a standard of proof which directs the jury to accept the plaintiff's version of the disputed facts if they are more probably true than not. But what happens when the most important disputed "facts" are judgments about probability? This paper offers an interpretation of the preponderance test which can be applied to this situation. In the example of the paper, B is the benefit of a drug, C is the health cost if it is a teratogen, and p is the probability of teratogenicity. The contested "fact" is the magnitude of p, the probability of harm. In the interpretation considered by the paper, the jury finds in favor of the plaintiff if the jury decides that it is more likely than not that p is greater than B/C. This definition of the preponderance test does not quite minimize expected costs, and compared with expected cost minimization it is likely to be biased toward under-protection when the health costs are high compared with the benefits. But when the mean and median of the second order probability of p are the same, the definition coincides with expected cost minimization. It is also shown that under a criterion of expected cost minimization, contrary to Posner, judicial error costs are not in general the same and the number of erroneous judgments favoring undeserving plaintiffs is not likely to be the same as the number of erroneous judgments favoring undeserving defendants

The Severance Tax as an Instrument of Intertemporal Equity

[No abstract]

Science and policy in marine resource management

This note discuses the problem of handling uncertainty in the management of marine resources. In one approach, "science first," scientific questions of fact are addressed first. Once it is concluded that there is a high probability that there is a problem, the analysis preceeds to value questions, where the costs and benefits of possible remedies are weighed. In the alternative "policy first" approach, value questions are addressed at the beginning. The note suggests that both approaches are needed and can be fitted together using a framework of statistical decision theory

A Groves-Like Mechanism in Risk Assessment

This paper links two research areas that have developed independently—incentives compatibility for public goods and elicitation of subjective probabilities. An analogy between incentives for reporting information in the two areas leads to the discovery of a new mechanism, based on the Groves mechanism, for eliciting subjective probabilities. In the public goods area, the analogy provides an extension of the basic theorem of truthful response to the more general case when one’s true valuation of the public good is state dependent. In the risk assessment area, the analogy provides a generalization of the traditional reporting mechanisms, proper scoring rules, and in doing so establishes a representation theorem for them. The paper considers three goals which a principal might have while choosing a transfer mechanism. These goals are: information pooling, strong research incentives for the agents, and identifiability of the agent with the best information. For two structures of information and the specific cases considered, the new mechanism performs well, compared with four traditional mechanisms, in achieving these goals

A general view of toxic chemicals and similar risks

The purposes of this Article are: (1) to define the characteristics common to environmental risk problems; (2) to distinguish environmental risk from classical pollution problems of water and air pollution; (3) to highlight factors which make environmental risk problems particularly difficult to manage; and (4) to suggest a direction in management more suited to the characteristics of environmental risk and hence more likely to be effective than the current approach

Policy First or Science First: Two Approaches in the Management of Risk

This paper compares two approaches toward handling of uncertainty in public policy decisions. In one approach, "science first," scientific questions of fact are addressed first. Once it is concluded that there is a high probability that there is a problem (for example that a chemical is a carcinogen) then the analysis proceeds to value questions, where the costs and benefits of possible remedies are weighed. In the alternative approach, "policy first," value questions are addressed from the beginning. The potential costs and benefits of wrong decisions are considered from the start, along with judgments about the probabilities of false positives and false negatives. This analysis leads to the identification of the scientific uncertainties most critical for the public policy decision; it suggests the most important areas for research; and it guides decisions of what to do in the meantime, for precautionary actions. The discussion is undertaken in terms of a particular public policy problem, management of municipal wastewater disposal in coastal waters

Pivot Mechanisms in Probability Revelation

The Groves mechanism and k^th price auctions are well-known examples of pivot mechanisms. In this paper an analogous pivot mechanism is defined for probability revelation and then the Bayesian equilibria are characterized for the three pivot mechanisms. The main result is that in Bayesian games with these pivot mechanisms, equilibria must satisfy a simple fixed point condition. The result does not require signal ordering properties and thus generalizes and simplifies results by Milgrom and others. When the fixed point is unique there is "no regret." The result also holds for games less structured than Bayesian games (where the common knowledge and consistency assumptions are relaxed). The pivot mechanism in probability revelation is shown to generalize and characterize proper scoring rules. The characterization yields an optimization of research incentives for proper scoring rules and suggests that under some conditions the new mechanisms, which are pivot mechanisms but not proper scoring rules, outperform proper scoring rules

Intergenerational Justice as Opportunity

This paper contrasts two views of intergenerational justice. The first view is a global one, which focuses on the aggregate well-being of each generation and discounts future generations' utilities. In this view discounting is not a notion of intergenerational justice; instead it is defended as a necessary condition of intergenerational efficiency. And intergenerational efficiency is not advanced as a notion of intergenerational justice but as a strongly desirable condition of any intergenerational just system. The appeal of the discounting approach is explained by a set of conditions which define neoclassical utilitarianism. Within the defining conditions, discounting future utilities is “natural," but not necessary for efficiency. The framework of intergenerational social choice also fits the defining conditions of neoclassical utilitarianism, and it is easy to construct choice rules which do not discount future utilities and yet which are intergenerationally efficient. Although there is room within neoclassical utilitarianism for efficient rules of choice which do not discount future utilities, the second view of intergenerational justice does not appear to fit naturally within the utilitarian system. The second view of intergenerational justice is specialized, and focuses on the preservation of "essential” opportunities. The second view becomes more appealing when the defining conditions of neoclassical utilitarianism are modified. In modifying the conditions, the notion of intergenerational efficiency becomes weaker, partly because as an ordering principle it becomes less complete and partly because potential Pareto improvements are no longer discretionary from the vantage point of the future. How much, if any, efficiency loss there might be from application of the specialized notion of intergenerational justice depends on the extent of modification of the defining conditions and the structure of institutions spanning generational time. The modified conditions appear to accord more closely with commonsense notions of intertemporal justice than do the original conditions. And thus the opportunity concept of intergenerational justice appears to be closer to our commonsense notions of intragenerational justice than does the global (discounting) concept

Responsibility, Liability, and Incentive Compatibility

In this paper I ask what should be the assignment of liability for risks of toxic chemicals, and more generally. I develop a theory of liability, based on two principles. The first is responsibility as own-cost-bearing and is justified on the grounds of fairness. The second is efficiency and is justified on the grounds of welfare. These two principles provide a joint foundation to the theory of incentive compatibility, which is an important consideration in the design of liability systems