Three Principles for Managing Risk in the Public Interest

We propose three principles and a general framework of reasoning for managing risk in the public interest. Principle 1. Risks shall be managed to maximize the total expected net benefit to society— The principle that the net benefit is to be maximized across society as a whole is argued to be a sufficient and rational guide to assessing the effectiveness of efforts directed at reducing risk and thus improving health and safety. The net benefit of an activity is the excess of the totality of benefits over the totality of detriments. Principle 2. The safety benefit to be promoted is life-expectancy— The goal is to ensure that risk mitigation efforts maximize the net benefit to society in the specific terms of length of life for all individuals. The effect of an activity on life expectancy is proposed as the proper basic measure of its net safety impact. Life expectancy is a universal measure valid for comparisons both within and among countries and can be adjusted to include health expectancy and other factors such as income levels that affect the quality of life. The impact on life expectancy allows a dispassionate accounting of the good and the bad inherent in any proposal or activity that is in the public interest but has some impact on life and health. Principle 3. Decisions for the public in regard to health and safety must be open and apply across the complete range of hazards to life and health— Systematic efforts to evaluate all the important consequences, both direct and indirect, are required to improve the basis for risk management in society. Balancing of the detriments and the benefits of any given initiative is the key aspect of the undertaking. Safety may well be an important objective in society, but it is not the only one. Thus, allocation of society's resources devoted to safety must be openly and continually appraised in light of other competing social needs because there is a limit on the resources that can be expended to save lives. Maximization of healthful life for all is judged the proper basis for managing risk in the public interest, and that this is achieved when the net of the contribution to the total saving of life exceeds the loss of life.     

Measurement of socio-economic inequality using the Life-Quality Index

As income inequality presents a narrow view of overall inequality prevailing in a society, the paper focuses on its much broader definition, referred to as socio-economic inequality, which considers the disparities in income as well as in mortality, and standard of living. The paper presents a new method for measuring the socio-economic inequality using a composite social indicator, Life-Quality Index, derived from two principal indicators of development, namely, the Real Gross Domestic Product per person and the life expectancy at birth. Income inequality and the associated life expectancy variations are integrated into a quality adjusted income (QAI), to account for the observed differentials in life-quality of various quintiles of the population. The Gini coefficient of the distribution of QAI is introduced as a measure of socio-econmic inequality. The proposed approach is illustrated using data on life expectancy of five income quintiles in urban Canada. It is found that the magnitude of inequality in Canada is higher than that reflected by the traditional measure, the Gini coefficient of income.     

Canada Wide Standard for Particulate Matter and Ozone: Cost-Benefit Analysis Using a Life Quality Index

The adverse impacts of particulate air pollution and ground-level ozone on public health and the environment have motivated the development of Canada Wide Standards (CWS) on air quality. In cost-benefit analysis of air-quality options, valuation of reduction in mortality is a critical step as it accounts for almost 80% of the total benefits and any bias in its evaluation can significantly skew the outcome of the analysis. The overestimation of benefits is a source of concern since it has the potential of diverting valuable resources from other needs to support broader health care objectives, education, and social services that contribute to enhanced quality of life. We have developed a framework of reasoning for the assessment of risk-reduction initiatives that would support the public interest and enhance safety and quality of life. This article presents the Life Quality Index (LQI) as a tool to quantify the level of expenditure beyond which it is no longer justifiable to spend resources in the name of safety. It is shown that the LQI is a compound social indicator comprising societal wealth and longevity, and it is also equivalent to a utility function consistent with the basic principles of welfare economics and decision analysis. The LQI approach overcomes several shortcomings of the method used by the CWS Development Committee and provides guidance on the compliance costs that can be justified to meet the Standards.