The safety of the work place is now a highly visible public issue. Many are calling for tighter regulation to reduce worker risk, while others feel government intervention is ineffective and costly. Here Kip Viscusi explores how well markets for hazardous jobs actually work. According to classical economics, other things being equal, a worker will demand more pay for a hazardous job than a safe one. However, this assumes that job related hazards are known, when often they are not. Using recent advances in the economics of information, Viscusi develops a theory of individual responses to job hazards under conditions of uncertainty.
His assumptions are that hazards are uncertain events and that learning about them is a process that takes place over time. He then employs this analysis to study the performance of job markets in matching persons and jobs and in compensating persons for exposure to hazards. Finally he tests his adaptive model of the decision to quit and finds substantial evidence that risks are indeed reflected in wage differentials and quit behavior.
How do people decide whether or not to take chances with their health and safety? Do they pay attention to warnings about hazardous products used at home or on the job? What is the best way to present this information? These questions are becoming increasingly important as direct government regulation is replaced by programs to educate workers and consumers about risk. Information itself is becoming a regulatory device, but until now little has been known about its use and effectiveness.
Learning about Risk offers important new evidence on how people process information about risk and how they make choices under uncertainty. Drawing on work in a variety of disciplines—economics, decision science, marketing, and psychology—as well as on extensive original survey data, the authors take a close look at one type of risk information: the labeling of hazardous products and chemicals. They use the word labeling to mean all the tangible ways in which information is transmitted, including not merely warnings on bottles and cans but also leaflets and brochures, signs in the workplace, and store displays. The authors surveyed hundreds of consumers and chemical workers to explore a range of issues—the accuracy and appropriateness of people's risk assessments, the types of precautions they take, the values they attach to these measures, the wages they expect for performing risky jobs, and the relationship between the precaution taken and the content, wording, and format of the warning.
Overall, the authors show that information policies are a promising approach to controlling risks in the marketplace and on the job. Their findings will be of interest to government officials, policy analysts, economists, psychologists, and managers concerned professionally with the labeling of hazardous products.
The current products liability crisis is both familiar and puzzling: million-dollar awards for apparently frivolous claims, inadequate settlements for thousands of people with severe injuries, skyrocketing insurance premiums, an overburdened judicial system. The adverse effects of this crisis on product innovation may be particularly detrimental to the extent that they deprive consumers of newer and safer goods. W. Kip Viscusi offers the first comprehensive and objective analysis of the crisis. He employs extensive, original empirical data to diagnose the causes and to assess the merits of alternative reform policies.
Drawing on both liability insurance trends and litigation patterns, Viscusi shows that the products liability crisis is not simply a phenomenon of the 1980s but has been developing for several decades. He argues that the principal causes have been the expansion of the doctrine of design defect, the emergence of mass toxic torts, and the increase in lawsuits involving hazard warnings. This explanation differs sharply from that of most other scholars, who blame the doctrine of strict liability. Viscusi reformulates the concept of design defect, grounding it in sound economic analysis. He also evaluates public policy regarding hazard warnings and proposes a new national approach.
More generally, the author sketches a comprehensive social risk policy, in which tort liability interacts with government health and safety regulation to foster a coherent set of institutional responses to health and safety risks. Reforming Products Liability will be of special interest to lawyers, judges, policymakers, economists, and all those interested in legal policy and health and safety issues.
Whose life is worth how much? To some people it seems immoral even to ask, but to others—to the worker, say, who is offered a dangerous but lucrative job—it is a practical question. Should government interfere with a worker's decision, a personal negotiation with destiny? If so, when and how?
Risk by Choice presents a comprehensive, nontechnical analysis of these questions and of government risk regulation policies in general. W. Kip Viscusi shows that the goal of a risk-free workplace is a chimera, leading to expensive regulatory programs that do little to lessen health and safety risks. He argues that when workers are aware of the hazards they face, market forces operate to promote efficient levels of risk. Government should intervene only when these forces fail to work—principally when workers do not understand the risks—and then should design policies that complement market forces rather than supplant them. Based in part on the author's experience as a member of the White House group that reviewed government regulations in many areas, this book offers the most extensive discussion available of the economic foundations of risk regulation, as well as new information on OSHA and the White House regulatory oversight process.
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