Paradoxes of the safe society: a rational actor approach to the reconceptualization of risk and the reformation of risk regulation.

• Author: Johnston, Jason Scott
• Position: Preferences and Rational Choice: New Perspectives and Legal Implications

INTRODUCTION

Contemporary attitudes toward risk seem paradoxical. Even as hundreds of billions of dollars are being spent to protect human health by reducing environmental pollution, designing safer products, and eliminating workplace hazards, residents of the United States and other developed nations are increasingly convinced that their environment will harm them, (1) and that the remaining risks of illness and disease are more serious than ever. (2) At the same time, people seem to be craving risk as they never have before. By virtually every statistical measure, participation in "extreme" sports, such as rock climbing, skateboarding, and paragliding, is growing exponentially. (3) Fast food restaurants across the world serve larger and larger "supersized" food portions. Together with an increasingly sedentary lifestyle, the consumption of such jumbo-sized, fat-laden meals virtually guarantees obesity--above optimal weight. (4) Obesity is in turn directly linked to a host of diseases, including Type 2 diabetes mellitus, coronary heart disease, certain forms of cancer, respiratory problems, and osteoarthritis of small and large joints. (5) National surveys show large and escalating increases in the prevalence of obesity (6) and its associated diseases. (7) Yet there is relatively little popular concern over obesity as a health problem. (8) It would thus seem that however much people today profess to loathe some risks, they are increasingly engaging in a variety of both active and passive risky behaviors.

In this Article, I explain the apparent paradox of risk as the predictable response of rational actors to long-term changes in social safety brought about primarily by radical improvements in medical treatment and care. This explanation begins by viewing recent behavior about risk within the context of longer-term changes in life expectancy and mortality. Life expectancy in the wealthy nations of the world has steadily increased. Although most of this increase is accounted for by a dramatic reduction in the incidence of infant and child mortality from infectious disease, (9) many of the communicable diseases have been completely eradicated from the developed world, (10) and age-specific death probabilities have fallen by a substantial amount for all ages. (11) By 1998, life expectancy for the United States population as a whole had reached 76.7 years, (12) and cancer and coronary heart disease had become the two most common causes of death. (13) Influenza, pneumonia, and tuberculosis, which together were the most common cause of death in 1900, were as insignificant in 1998 as cancer had been in 1900. (14) Strikingly, virtually every one of the top ten causes of death in the United States in 1998 (e.g., cancer, heart disease, diabetes, suicide) (15) was directly related not only to longevity but also to the lifestyle of a long-living, affluent population. (16)

It is my contention in this Article that the key, policy-relevant aspects of contemporary American attitudes toward and choices about risky activities are precisely what one would expect to observe among rational economic actors confronted by such long-term changes in the causes of human mortality. When people expect to live longer and healthier lives, they have more to lose from the remaining risks of disease and illness. Activities that generate such risks but do not confer any concrete individual benefits, and so are not individually chosen, are viewed simply as "bads," something for regulators to curb or eliminate. Yet, individuals feel far differently about risky activities that do generate concrete, tangible, and immediate individual benefits. Whether hang gliding off a mountain or inhaling a supersized meal, people do not engage in such risky activities because they mistake the magnitude of the risk, or "irrationally" discount future health costs to get present benefits. Rather, they do so because such activities generate direct benefits in consumption, and because both the market and the State have and will continue to generate incentives for new technologies that both reduce the risk of death from such risky behavior and reverse the nonfatal, adverse health consequences. People increasingly choose to engage in risky activities because they rationally know that the health risks of those activities have fallen dramatically and rationally expect continued decreases in risk.

In Part I, I back up this argument by explaining how the standard economic model of individual choice that is used to derive widely used value of statistical life (VSL) can be extended to take account of how changes in background mortality risk affect willingness to pay for specific risk reduction. A crucial distinction that emerges from this model is between risks raised by activities that individuals perceive as economic goods--as generating consumption benefits--and those that arise from economic bads--activities that cause disutility and which individuals pay to avoid. After demonstrating how this model can explain many of the most prominent cross-sectional and temporal trends in behavior toward risk, I discuss some of its many implications for risk regulation in Part II. Among these is the prediction that the demand for public risk regulation will continually increase, even as its absolute effectiveness decreases. Finally, I argue that however undesirable this may seem, technocratic approaches--the screening of actual individual risk perceptions and preferences by experts of one ilk or another--are not the way to reform risk regulation. So long as risk regulation remains political, individual preferences toward risk will drive risk regulation. The proper approach to regulatory reform is not to discount individual risk perceptions and preferences as the product of various irrationalities and cognitive imperfections, but rather to devolve regulatory authority, to replace uniform federal risk regulation with place-specific approaches that better reflect individual costs and benefits.

1. EXPLAINING THE PARADOX: RISK AS AN ATTRIBUTE OF CHOICE AND CONSTRAINT

   1. Increasing Social Safety and Individual Valuation of Remaining Risks of Disease and Illness: The Extended VSL Model

      In this Section, I explicate an individual choice-theoretic model that captures how general changes in life expectancy and the causes of eventual death noted above have changed the risk preferences of a typical American. I first hypothesize (informally) about the response of Homo economicus to the dramatic changes in human mortality that have occurred over the last century in the United States. Then I explain (informally) the more formal approach, which I call the "Extended Value of Statistical Life" (VSL) model.

      1. Some Intuition on Background Mortality Risk and Risk Valuation

         Increased life expectancy at birth and through childhood does not necessarily translate into an increase in life expectancy at older ages. If, for instance, a society eradicated childhood disease by diverting resources away from the study of new techniques to cure or ameliorate diseases affecting the elderly, then a person in that society might have an increase in life expectancy while young but a decrease in life expectancy while old. (17) This has not been the case in the United States. (18) To the contrary, through the Medicare program, in the late twentieth century the American federal government massively subsidized the development of new treatments and technologies for diseases that affect the elderly. (19) That investment has generated an increase in American life expectancies at all ages. (20) In other words, whatever her age might be, when looking to the future, a late twentieth century American would perceive far fewer life-threatening events or activities as potentially life-threatening as would an American of a century before.

         For the typical economic agent, this dramatic fall in what I shall call the "baseline mortality rate" (corresponding to an increase in baseline life expectancy) has had two seemingly conflicting consequences. On the one hand, the agent's aversion to the risk of death from a particular illness or disease will have increased. On the other hand, the agent's valuation of risk as a positive attribute of voluntarily undertaken activities will also have increased.

         By saying that the cost of risk from disease or illness will have increased, I mean simply that because a person expects to live longer, she has more at stake in being exposed to any additional mortality risk. Other things being equal, the higher a person's perceived probability of continuing to live, the greater the effort such a person will be willing to expend to avoid or eliminate an additional life-threatening disease or illness. The more a society succeeds in eliminating life-threatening diseases, the more people come to expect from their lives, and hence the greater the cost to them of remaining life-threatening diseases and illnesses.

         This point can be made more precise by considering the following simplified and abstracted model of individual behavior: Suppose that an individual lives for three periods, one consisting of childhood, where her choices are largely made for her by her parents, and two adult choice periods. Suppose further that at the outset of the second (first adult) choice period, we tell our hypothetical person about a particular form of cancer (cancer x, as I shall refer to it) that invariably ends an afflicted person's life at the end of the second period. We tell the person everything we know about this disease--the odds that it will develop, its symptoms, etc.--and then attempt somehow to measure how much concern the person has about this form of cancer. (For present purposes, it doesn't matter whether we try to measure such concern with cardinal dollars, as do economists, or with the kind of ordinal ranking scale utilized by psychologists.) Now suppose that recent changes in the society (such as the...