Can ranking techniques elicit robust values?

This paper reports two experiments which examine the use of ranking methods to elicit ‘certainty equivalent’ values. It investigates whether such methods are able to eliminate the disparities between choice and value which constitute the ‘preference reversal phenomenon’ and which thereby pose serious problems for both theory and policy application. The results show that ranking methods are vulnerable to distorting effects of their own, but that when such effects are controlled for, the preference reversal phenomenon, previously so strong and striking, is very considerably attenuated.

Evidence of a new violation of the independence axiom

During the past 40 years there has been an accumulation of experimental evidence suggesting that most of the axioms of expected utility theory are liable to be systematically violated by substantial numbers of individuals. Much of this evidence has focused on failures of the independence axiom and has stimulated a number of alternative models that try to explain that evidence in various ways. This article presents a fresh experiment that looks at a different kind of violation—one that does not appear to be easily accommodated by several of the more prominent alternative models as they are currently formulated.The experimental work reported in this article was funded by Economic and Social Research Council Award No. B 00 23 2163.     

Risk reduction or risk compensation? The case of mandatory safety-belt use laws

The technological approach to risk regulation seeks to lessen the incidence of mortality and morbidity by modifying environmental conditions. Insofar as risk-taking behavior is purposive, social scientists have predicted that technological progress may be negated by various forms of risk compensation. The validity of this hypothesis is tested in the transportation sector with data from the U.S. on the effects of new mandatory safety-belt-use laws. A fixed-effects model of traffic fatality counts is estimated using pooled data from 50 states during the 1975–1987 period. Results suggest that such laws have reduced mortality among car occupants to a degree that is compatible with the predictions of technologists. However, there is weak evidence of increased mortality among some nonoccupants, a pattern predicted by risk-compensation theorists. The lifesaving effects of belt-use laws are largest in states that permit primary police enforcement and appear to be somewhat larger for front-seat occupants age 21 and under. Although offsetting behavior appears to be small relative to lifesaving effects, it may take several more years for any compensatory behavior to achieve a new equilibrium.This research was supported in part by a grant from the Centers for Disease Control to the New England Injury Prevention Research Center.     

Observing different orders of risk aversion

A decision maker's attitude towards risk is said to be of orderi, i=1, 2, if for every given riskē with expected value zero, the risk premium the decision maker is willing to pay to avoid the risktē goes witht to zero at the same order ast ⁱ. This article presents an experiment testing the order of decision makers' attitudes toward risk. Its major result is that both attitudes exist, each in significant proportions. Moreover, two classes of first-order behavior are defined. The rank-dependent model (Quiggin, 1982) belongs to one, the disappointment aversion model (Gul, 1991) to the other. We show that only the first of these two classes appears among our subjects.     

Validating Benefit and Cost Estimates: The Case of Airbag Regulation

Preregulation estimates of benefits and costs are rarely validated after regulations are implemented. This article performs such a validation for the mandatory automobile airbag requirement. We found that the original 1984 model used to estimate benefits became invalid when 1997 values were input into that 1984 model. However, using a published 1997 cost-effectiveness model, we demonstrate, by replacing the model inputs with the values from 1984, that the 1997 cost-effectiveness ratios, based on real-world crash data and tear-down cost data, are less attractive than what would have been originally anticipated. The three most important errors in the 1984 input values are identified: the overestimation of airbag effectiveness, the overestimation of baseline fatality/injury rates, and the underestimation of manual safety belt use. This case study, which suggests that airbags are a reasonable investment in safety, shows that the regulatory analysis tools do not always produce findings that are biased against health, safety, and environmental regulation. Future validation studies of health, safety, and environmental regulation should focus on validation of benefit and risk estimates, areas where we found significant error, as well as on cost estimates.     

The complexity of roles in community action projects: The example of the evaluation of ‘alternatives’

Evaluation of community interventions is a special form of evaluation involving many roles that are key to accomplishing both the intervention and the accompanying research. The present paper describes the roles involved in the evaluation of a community intervention (‘Alternatives’) aimed at safer use of alcohol and depressant medications by seniors.The three core roles were the community developer who provided leadership in the implementation of the project, the researcher/evaluator, and the community committee that sanctioned and facilitated the project. Other roles on the project included: the project coordinator, the nurse-interviewers who collected the survey data for the evaluation, volunteers from seniors groups, local health service providers, the media, the funders, and others on the project team who provided specific technical expertise.The paper describes the competing interests among these roles as well as conflicts that arose and how these conflicts were handled. Although specific roles are described, the types of roles and the potential for competing interests and conflict are generally relevant to community level evaluations.     

Financial Liberalisation in Southern Africa: An Assessment

In the early 1990s many Southern African economies embarked on financial liberalisation. Although it is too soon to carry out sophisticated econometric analysis of this change in policy, the available empirical evidence may be inspected to see whether it lends support to advocates of financial liberalisation. In this article we explore the avenues through which financial liberalisation might be expected to exert an influence. Consistent with much of the existing literature, we discover that a degree of agnosticism is warranted. Financial liberalisation is no panacea and will not improve economic performance unless accompanied by sound economic policies. It remains difficult to isolate the effects of financial liberalisation from the data available.     

Reducing the Risk of Injury from Table Saw Use: The Potential Benefits and Costs of Automatic Protection

The use of table saws in the United States is associated with approximately 28,000 emergency department (ED) visits and 2,000 cases of finger amputation per year. This article provides a quantitative estimate of the economic benefits of automatic protection systems that could be designed into new table saw products. Benefits are defined as reduced health‐care costs, enhanced production at work, and diminished pain and suffering. The present value of the benefits of automatic protection over the life of the table saw are interpreted as the switch‐point cost value, the maximum investment in automatic protection that can be justified by benefit‐cost comparison. Using two alternative methods for monetizing pain and suffering, the study finds switch‐point cost values of $753 and $561 per saw. These point estimates are sensitive to the values of inputs, especially the average cost of injury. The various switch‐point cost values are substantially higher than rough estimates of the incremental cost of automatic protection systems. Uncertainties and future research needs are discussed.     

Who Lives Near Coke Plants and Oil Refineries? An Exploration of the Environmental Inequity Hypothesis

Facility-specific information on pollution was obtained for 36 coke plants and 46 oil refineries in the United States and matched with information on populations surrounding these 82 facilities. These data were analyzed to determine whether environmental inequities were present, whether they were more economic or racial in nature, and whether the racial composition of nearby communities has changed significantly since plants began operations.The Census tracts near coke plants have a disproportionate share of poor and nonwhite residents. Multivariate analyses suggest that existing inequities are primarily economic in nature. The findings for oil refineries are not strongly supportive of the environmental inequity hypothesis. Rank ordering of facilities by race, poverty, and pollution produces limited (although not consistent) evidence that the more risky facilities tend to be operating in communities with above-median proportions of nonwhite residents (near coke plants) and Hispanic residents (near oil refineries). Over time, the racial makeup of many communities near facilities has changed significantly, particularly in the case of coke plants sited in the early 1900s. Further risk-oriented studies of multiple manufacturing facilities in various industrial sectors of the economy are recommended.The authors are all affiliated with the Harvard Center for Risk Analysis     

Social Isolation and Lethal Violence Across the Metro/Nonmetro Divide: The Effects of Socioeconomic Disadvantage and Poverty Concentration on Homicide*

Abstract This study extends the macro‐level criminological research tradition by examining the links between socioeconomic disadvantage, poverty concentration, and homicide in metropolitan and nonmetropolitan U.S. counties. Most research in this tradition has tested structural theories using urban areas as the unit of analysis. This “urban bias” has resulted in a limited understanding of the social forces driving violence in nonmetropolitan areas. To partially address this problem, we link the literature on the spatial and social organization of nonmetropolitan communities with the social isolation perspective from the urban poverty literature. We hypothesize that the spatial concentration of poverty drives up rates of homicide in both metropolitan and nonmetropolitan areas regardless of levels of socioeconomic disadvantage. Negative binomial regression for 1,746 nonmetropolitan and 778 metropolitan counties suggest that both socioeconomic disadvantage and poverty concentration elevate homicide in metropolitan areas. However, in nonmetropolitan counties only socioeconomic disadvantage has a significant impact. We conclude by discussing the implications of these differential findings for the social isolation perspective.