363-1124-00L  The Economics of Societal Decisions under Risk

SemesterHerbstsemester 2019
DozierendeD. Heyen
Periodizitätjährlich wiederkehrende Veranstaltung


363-1124-00 VThe Economics of Societal Decisions under Risk2 Std.
Di08:15-10:00HG E 33.5 »
D. Heyen


KurzbeschreibungSocietal decisions often involve risk: Should a new drug or pesticide be approved, given the unknown side-effects to human health and the environment? What principles should guide such decisions? This course provides the theoretical toolkit (in particular Cost-Benefit Analysis) for societal decision-making under risk and contrasts theoretical recommendation with the actual regulatory practice.
LernzielBy the end of the course, students will be able to:
1. Summarize the theory of cost-benefit analysis under risk by Name the building blocks of cost-benefit analysis under risk
2. Describe the connections and differences between welfare economics under uncertainty and cost benefit analysis under risk
3. List real-world examples of risk regulation and explain differences between practice and theoretical recommendation
4. Analyze real-world risk-regulatory problems by breaking them up into relevant components
5. Select an appropriate framework for evaluating stylized risk regulatory tasks
6. Prepare a well-founded and comprehensive recommendation and discuss limitations and robustness

In addition to these course-specific learning objectives, students shall also develop their skills in
7. Working successfully in a team: Agree on a topic for a joint project, execute the project together, and prepare a joint report
8. Convey complex information succinctly and effectively in a written report
9. Provide fellow students with useful feedback on their work
Inhalt17 Sep Welcome and course logistic; Introduction to decision theory
The Precautionary Principle: Basic narrative and context
24 Sep Conceptual Foundation of Cost-Benefit Analysis (CBA)
Reality of Risk Management: Pesticide regulation
01 Oct Microeconomic Foundations of Cost-Benefit Analysis
Reality of Risk Regulation: Violation of the equimarginal principle
08 Oct Uncertainty in CBA: the dominant, naïve approach
Risk Assessment in Practice
15 Oct Value of Learning: sequential models of risk regulation
Risk assessment: compatible with models of value of learning?
22 Oct Option price and option value: Theory
Option price and option value: Practice
29 Oct Uncertainty and the social discount rate
Discounting in the real world
05 Nov Midterm Quiz
[Student projects: Discuss which tool they use]
12 Nov Welfare economics: utilitarianism and ex-ante egalitarianism
Welfare economics: the long way from theory to practice
19 Nov Risk-risk trade-off: theory and practice
[Some time allocated to student projects]
26 Nov Welfare economics beyond risk: ambiguity and alternatives
Limitations of CBA: Climate Risk and fat tails
03 Dec Political Economy of Risk Regulation: Actors and Incentives
[Some time allocated to student projects]
10 Dec International Dimension of Risk Regulation
The reality of precaution
17 Dec Project Presentations
Wrap-up and outlook
LiteraturThe course is based on chapters of the following three books:

1. Boardman, Anthony E., David H. Greenberg, Aidan R. Vining, und David L. Weimer. Cost-benefit analysis: concepts and practice. Cambridge University Press, 2017.

2. Adler, Matthew D., und Marc Fleurbaey. The Oxford Handbook of Well-Being and Public Policy. Oxford University Press, 2016.

3. Wiener, Jonathan B., James Hammit, Michael Rogers, und Peter Sand. The reality of precaution: Comparing risk regulation in the United States and Europe. RFF Press, 2011.
Voraussetzungen / BesonderesThe main prerequisite is an interest in understanding public policy making from a theoretical perspective. A basic knowledge of Microeconomics is helpful.


Information zur Leistungskontrolle (gültig bis die Lerneinheit neu gelesen wird)
Leistungskontrolle als Semesterkurs
ECTS Kreditpunkte3 KP
PrüfendeD. Heyen
Formbenotete Semesterleistung
RepetitionRepetition nur nach erneuter Belegung der Lerneinheit möglich.


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