Policy Reversals in Risk Management: The Effect of Refined Analyses

Abstract

Reversals of policy recommendations occur in risk management when the social decision maker aggregates individuals' subjective utilities for the outcomes of a risky policy measure. The level of detail with which these outcomes are described can significantly affect the resulting policy recommendation. The choice of the level of detail on which we conduct an analysis therefore amounts to an implicit value judgment. Moreover, the power to fix the level of the analysis implies partial control over policy recommendations. We propose an alternative approach to decision—theoretically sound risk management.

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