Inaccurately Assessing Risk Can Be Costly
March 17, 1999
People often either overestimate or underestimate the degree of risk involved in certain situations or events, observes Harvard University law professor W. Kip Viscusi in his book "Rational Risk Policy." As a result, we often pass health and environmental laws whose costs are out of proportion to the risk involved.
Here are some interesting observations from his book:
- Smokers estimate the risk of dying from cigarettes at 47 percent, while those who have never smoked say it is 59 percent -- but the U.S. Surgeon General's office only puts the risk at between 18 percent to 36 percent.
- One chest x-ray presents the same risk of dying from cancer due to radiation as living 150 years within 20 miles of a nuclear power plant -- a 1-in-1-million risk.
- The same annual risk ratio holds true for dying of air pollution by living two days in New York City or Boston.
- And, again, it holds true for dying by accident when traveling 10 miles by bicycle.
Viscusi theorizes that government agencies may incur 90 percent of the costs of a risk abatement program to eliminate the last 10 percent of a risk.
For example, in the hazardous waste cleanup program, Superfund, the first 5 percent of expenditures eliminates 99.46 percent of the total expected cases of cancer. The remaining 95 percent of expenditures, he says, achieves virtually nothing in terms of health risk reduction.
Source: Macroscope, "What Do Rules Cost?" Investor's Business Daily, March 17, 1999.
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