The Precautionary Principle as a Basis for Decision Making - Assignment Example

Precautionary Principle College: Name: Students ID: Date: Course Name: Unit Code: Time: Instructor: 1. In your own words, summarise the article. What is the main message of this article? Sunstein notes that the precautionary principle is becoming more and more popular. For this reason, he asserts that the precautionary principle is expected to considerably impinge on policies all over the world in the coming times. He simply understands the precautionary principle as “it is better to be safe than sorry.” He states that the principle comes in a lot of varied forms, ranging from weak to strong. Sunstein singles out the European Union as a key supporter of the precautionary principle as a basis for making decisions. He states that although the EU does not spell out any version of the principle to be used, it evidently supports general regulation even when harm is not well known, in fact even when harm is very much speculative. Sunstein states that the application of the precautionary principle, in any of its forms, possibly will lead to spectacular changes in decision making. Given that it will be applied in sensitive areas in environmental and health matters, its strengths and weakness should be well-thought out ahead of using it to help make knotty decisions. Sunstein questions the precautionary principle seeing as it is not clear regarding what safety entails, including the costs of providing safety. He also points out that regulatory precautions are conceptually tricky since risks are sometimes unforeseen; they can arise from action as well as from inaction. Also, Sunstein states that strong versions of the precautionary principle are rationally conflicting. Drawing from examples such as genetically modified foods, nuclear power, and terrorism, among others, Sunstein concludes that at times regulation negates the principle as it gives rise to other risks, in form of hazards that happen, or are boosted. In light of this, Sunstein advocates for the consideration of all relevant risks, not only those ‘lessened by regulation.’ Moreover, it is true that regulations and policy interventions make use of limited resources. Therefore, there has to be a trade-off between wealth and health. So in situations where regulation entails huge costs, the precautionary principle will be hard to apply. As a consequence, doubt arises as regards various costly regulations. In the midst of this, ‘the precautionary principle impedes regulation and non-regulation, and indeed everything involved.’ There are various alternatives that can help solve this dilemma but they are too limited. First new risks could be rejected but existing risks be accepted, but this is not easy to support in principle. The second alternative is to take on all new risks and deride existing risks, but this way, extremely risky innovations with small benefit would be approved. The third option is to apply the precautionary principle to more relevant risks or those that concern the public, this way, less salient or detectable risks will not be cared for. In the end no option is sensible seeing as all options lead to same result. To sum it up, Sunstein states that the precautionary principle does not provide guidance on how much to regulate; it does not easily allow for weighing up the variables that are at stake. Sunstein finally advocates for the need to balance benefits and costs. He argues that ‘proper cost-benefit analysis can and should incorporate concerns about precaution.’ Even though in a number of cases balancing of benefits and costs may well be easy, in other cases it may well be hard to put a figure on benefits, for example, in terrorism. However, he states that no case should be excused. Sunstein states societies must accept that it is hard to find a risk-free environment. As people endeavour to create such environments, there is a possibility of expanding the already existing problems. He therefore states that ‘hard choices must be made.’ In a nutshell, the message Sunstein is trying to put across is that even though the precautionary principle is useful in making difficult decisions, it can be confusing and may not offer any direction at all. It is important that regulations balance costs against benefits. 2. Conduct your own research of the literature on the ‘precautionary principle’. Describe the ‘precautionary principle’ in your own words and briefly explain the main application of this principle in practice. Do you agree with the evaluation of the principle by the author of the article? Make sure you justify your answer. There is no concise definition of the precautionary principle in literature. The precautionary principle is usually understood and interpreted within the context in which it is applied. However, two key elements as regards the precautionary principle have been extensively discussed and prominently stand out. These are: (1) Uncertainty; (2) Threat to cause serious or irreversible harm on people’s health or the environment (Da Cruz Vilaca, 2004). It is undisputable that the precautionary principle is for the most part applied in cases of uncertainty. This uncertainty may well involve the “dangers and risks” posed by substances and environmental dangers and risks, among others that will possibly impinge on the environment and human health (Da Cruz Vilaca, 2004). Also there may be uncertainty as regards the possibility and/or level of probable damage. Other articles call it scientific uncertainty since it may result from the insufficiency of appropriate scientific information and understanding concerning the extent of the probable damaging effects. This could essentially occur in situations where the obtainable scientific evidence is not sufficient, is questionable or uncertain. Such circumstances necessitate the application of the precautionary principle. The second key element of the precautionary principle is that there has got to threat to harm on people’s health or the environment that will cause serious or irreversible damage. Such situations require protective measures. This element on the whole reappears common all descriptions and definitions of cause serious or irreversible albeit in different phrasing that can be general or more specific and is made to fit a particular situation that is to be safeguarded. Similar pointers to the extent of the damage appears in form of there must be “serious risks”, “serious and irreversible damage”, “non-negligible damage”, “a threat of serious or irreversible damage”, “significant damage or harm”, or “serious or irreversible threats to health or the environment” (Goklany, 2001). Based on these elements, it can be said that the precautionary principle offers a means through which authorities can act to safeguard the environment and protect people’s health notwithstanding uncertainty (Manson, 2002). One crucial area where the precautionary principle has been intended to help reduce harm to the environment is the problem of climate change. In this situation, the simple existence and size of anthropogenic climate change are uncertain subject matters. Some effects such as the rise in seal level as a result of an increase in temperature are clear, however, other damages are not well implicit. There are uncertainties as regards localisation, time differences stuck between GHG gases emissions and damages, rate of recurrence, extent, (ir) reversibility, and character, among others (Intergovernmental Panel on Climate Change, 2001). Moreover, the most terrible uncertainty in climate change is bare lack of knowledge, and the international society accepts as true the likelihood of surprises occurring. In the midst of such uncertainty, the international society has to make a decision whether to take action or not and how to proceed. Taking action or not is a matter of establishing thresholds. The UNFCCC states that action based on the precautionary principle ought to be taken to avoid ‘threats of serious or irreversible damage’. The scope of consequences attributable to climate change is very much unidentified. Besides, from the perspective of climate change, gravity and irreversibility are closely linked and equally support each other, so that precautionary measures are warranted. In addition, application of the precautionary principle may well rectify what would or else be a propensity to underestimate the costs of not taking action to avert or tone down potential environmental and health risks (Sands, 2003). Finally, I do not agree with the evaluation of the precautionary principle by Sunstein. All of his reasons for disapproving the precautionary principle do not offer a solution towards a better means of facilitating making thorny decisions. He seems to lay great emphasis on the cost-benefit analysis (Sunstein, 2005). However, the precautionary principle can validate directing less concentration to “bottom line” quantitative approximation of the costs of absolute climate change, terrorism and genetically modified foods and more interest is pointed towards avoiding appalling but very much uncertain consequences on the environment and human health. 3. Provide an in-depth impact analysis of ‘precautionary principle’ in the following two sectors [concrete facts and figures are encouraged]: i. Pharmaceutical Industry The precautionary principle is commonly brought into play in regulations relating to drugs. Pharmaceutical companies are required to exhibit the usefulness and safety of their drugs ahead of selling them. Since the companies benefit from the sale of their drugs, they are expected to assume the task for showing that their products meet particular safety standards. Authorities, such as the Food and Drug Authority (FDA) take on a precautionary approach while approving drugs. In a precautionary manner, the authorities seek to stop the release of unsafe drugs. The main argument here is that if the risk of harms of a drug is unknown, then it is safer to ban it as a precaution as opposed to waiting up to the time when harms turn out to be visible. In theory it is assumed that there are no benefits of “illegal” drugs, for this reason, disapproving them will have no drawbacks with the probable effect that the banning the drugs will be advantageous to society (Trouwborst, 2002). ii. Energy Industry In the energy industry, the precautionary principle is mainly associated to nuclear power. In recent times, several parts of the world especially Japan (March 11, Fukushima) have experienced catastrophic nuclear power effects. Out of this experience, it is clear that there is great threat in using nuclear reactors. In fact some countries’ have taken action to stop the use of nuclear power. For instance, Germany decided to put to a stop to their dependence on nuclear energy by 2022. In addition, the United States (US) is currently debating the position of nuclear technology in meeting its energy requirements. There has been reliance on the safeguards and internal processes to guarantee security of nuclear technology. However, nuclear technology is highly complex and this reliability has proven to be insufficient borrowing from failures such as Three Mile Island, Chernobyl and Fukushima. Also, B-2 Bombers transporting nuclear weapons in the US have crashed severally. Having such empirical proof, precautionary measures in handling nuclear technology have been proposed to avert other catastrophic disasters (Zhong, 2000). Can you propose an alternative mechanism to overcome some of the limitations of the ‘precautionary principle’? There is no perfect law that exists on earth. Indeed the precautionary principle has its own limitations, however, in principle; it is a move towards ensuring better safety of the environment and improved human health conditions. It has been argued that the principle is unclear and contradictory. However, this is a common element in international law. The way out is to seek alternatives. As regards this, Sunstein puts forward three possible alternatives and argues that they are not viable. The other way out would be to let those who propose new technologies to take the burden of ensuring that their technologies are safe (O’Brien, 2000). Sustein argues that higher levels of precaution would hinder further innovation, but ‘precaution’ does not mean to ‘stop’. It is a gateway to undertaking further research and out of the ‘precaution’ we will have better technology. Moreover, the precautionary principle has been taken to mean that it shall lead to a ‘risk-free’ society. The point here is that attaining a risk free society is a ‘fallacy’, as Sunstein calls it. The real aim of the precautionary principle is to cut down the risk of harm on the environment and on human health as has not been achieved in prior times (Soule, 2000). Sustein also emphasises greatly on conducting a cost-benefit analysis. The problem here is that, since it is difficult to estimate costs, there is a possibility of the costs and benefits being manipulated to suit particular interests. In fact, the European Commission precautionary principle statement asserts that "protection of health takes precedence over economic considerations." In addition, the UNFCCC states that taking action based on the precautionary principle is required to avoid ‘threats of serious or irreversible damage’. Seriousness is exceptionally subjective to the extent that it cannot be objectified through a cost-benefit analysis. Indeed, the very character of the precautionary principle leaves the conventional cost-benefit analysis insufficient owing to the consequences of uncertainty (European Environment Agency, 2001). 4. Explain the principle of perfect competition. What is the relationship between the principle of perfect competition and the precautionary principle? Do they complement to each other? Perfect competition is a type of market structure. Perfect competition is characterised by free entry and exit of firms and therefore has a large number of firms that produce homogeneous products. An individual firm’s maximum output is quite small compared to the total demand of the industry product so that a single firm has no effect on the price of the product by altering its supply or output. There is free movement of goods and services and economic agents have full understanding of the market situation. Perfect competition can be analysed in the short-run and in the long-run. To start with, in the short-run, some inputs are fixed translating to fixed costs; therefore the firm aims for the output that maximises profits or minimises loses. At this point, the marginal revenue (MR) equals the short-run marginal cost (MC). Given that the firm faces a perfectly inelastic demand curve, P=MR, the condition for the best output level becomes P=MR=MC. Therefore, Qs will be the quantity supplied in the market (Mankiw, 2014). This is indicated in the figure below; Figure 1: Short-run Perfect Competition Cost/Price SMC SATC D = P = MR 0 Qe Quantities In the long-run, all costs and inputs are variable; hence the firm chooses its own the optimum production level. The best point to produce at is where P = LMC, however, the optimal production point is where the short-run average total cost (SATC) curve is tangent to the long-run average cost (LAC) curve at the best level of output. Given that there is free entry or exit of firms, the firm’s long-run equilibrium is at the lowest point of the LAC and this is also the break-even point. Long-run equilibrium is where P = LMC = LAC (Mankiw, 2014). This is indicated by QL in the figure below; Cost/Price SMC1 LMC S S1 P SAC1 LAC P SMC SAC P1 P1 0 Q QL 0 Given that perfect competition is associated with the efficient allocation of resources, and considering the characteristics highlighted above, there is a possibility that regulations such as the precautionary principle will have an effect on the economy/market through a distortion of competition through government interference. Therefore, the cost, price and output level will be affected (Macrory, 2004). Since is international in nature, member states are most unlikely to have a similar method of allocating resources. Authorities may opt to distribute allowances for free or auction allowances. Auctions may well affect a firm’s financial position (Macrory, 2004). For free distributions there are no price distortions, particularly in perfectly competitive markets, however there is a transfer of wealth to firms, seeing as they obtain an input that has market value. Given that this is a onetime payment, it does not cut efficiency since it does not vary the output and pricing decisions of a firm. This implies that regulations only make existing efficiencies stronger, but do not generate them. In light of this, the precautionary principle and perfect competition merely complement each other (Graham & Hsia, 2002). 5. ‘The precautionary principle is frequently paralyzing: It can stand as an obstacle to regulation and non-regulation, and to everything in between.’ Evaluate this statement of the author in light of post-GFC international regulatory reforms. Do you think the post-GFC international regulatory reforms can prevent future financial crisis? Explain. This statement in the context of the post-GFC international regulatory reforms is misleading. The period leading to the Global Financial Crisis (GFC) heavily relied upon the neo-liberal thinking that global financial markets would in due course self-correct. That, through the market forces of demand and supply (the invisible hand), the market would find its own equilibrium. However, Stiglitz has sharply criticised this view stating that "the reason that the invisible hand often seems invisible is that it is not there." Therefore, financial markets could not self-correct. It is for this reason that the neo-liberalism's anti-regulation plan in haste transformed a hitch in the American mortgage markets into a full-scale global financial and economic crisis. If precautionary measures were taken, maybe the crisis could have been prevented (Norton Rose Fulbright, 2009). In a survey conducted and published by Norton Rose Fulbright (2009), 45.7 per cent of the respondents interviewed stated that they thought improved regulation could have helped to avert the GFC (figure 2). The report states that there is a general feeling that the GFC spread mainly due to poor regulation. The respondents also stated that the markets cannot be left to self-regulate. It is for this reason that many policy makers accepted that the regulatory regimes ought to be revised. Although there is no guarantee that post-GFC international regulatory reforms can prevent future financial crisis, regulation is a step towards the right direction and only time can prove the regulations right or wrong (Foster et al. 2000). Figure 2: Percentage of respondents supporting that regulation could have prevented the GFC Source: Norton Rose Fulbright (2009). References Da Cruz Vilaca, J.L. (2004). The Precautionary Principle in EC Law. European Public Law, 10 (2): 369-406. European Environment Agency. (2001). Late Lessons from Early Warnings: The Precautionary Principle 1896–2000. Copenhagen: European Environment Agency. Foster, K.R. Paolo, V. Michael, H.R. (2000). Science and the precautionary principle. Science, 288: 979–81. Graham, J. and Hsia, S. (2002). Europe’s Precautionary Principle: Promise and Pitfalls. Journal of Risk Res., 5(4): 380. Goklany, I. (2001). The Precautionary Principle: A Critical Appraisal of Environmental Risk Assessment. Washington, D.C.: The Cato Institute. Intergovernmental Panel on Climate Change (IPCC). (2001). Climate Change 2001: The Science of Climate Change. Cambridge: Cambridge University Press. Macrory, R., (ed.) (2004). Principles of European Environmental Law. The Avosetta series 4, Europa Law Publishing. Mankiw, G. (2014). Principles of Economics. 7th edn. Cengage Learning. Manson, N.A. (2002). Formulating the precautionary principle. Environmental Ethics, 24: 263–274. Myers N. (2000). Debating the Precautionary Principle. Science and Environmental Health Network. Norton Rose Fulbright. (2009). Global financial crisis - financial institutions in the future. Viewed 10 April 2014, . O’Brien, M. (2000). Making Better Environmental Decisions: An Alternative to Risk Assessment. Cambridge, MA: MIT Press. Sands, P. (2003). Principles of International Environmental Law, 2nd edn. Cambridge University Press. Soule, E. (2000). Assessing the precautionary principle. Public Affairs Quarterly, 14: 309–328. Sunstein, C.R. (2005). Laws of Fear: Beyond the Precautionary Principle. Cambridge University Press. Sunstein, C. R. (2005). The Precautionary Principle as a Basis for Decision Making. The Economist’s Voice, 2(2): 1-9. Trouwborst, A. (2002). Evolution and Status of the Precautionary Principle in International Law. Norwell, Mass.: Kluwer Law International. Zhong, L. (2000). Nuclear Energy: China's Approach towards Addressing Global Warming. Geological International Environmental Literature Review, 12: 493. Read More