Environmental Economics

Endogenous Risk and Environmental Policy

Formal evaluations of environmental programs are made using a framework that takes the risks from environmental pollution as exogenous, in other words, the individual cannot influence the size or type of risk by modifying his or her actions. The purpose of this report was to summarize the researchers' work on the implications for environmental policy of treating environmental risks as endogenous rather than exogenous. The authors assert that if environmental risks are endogenous, then the basis for the traditional risk-assessment risk-management approach should be rejected in favor of a simultaneous physical-biological-economic approach. Secondly they show that if environmental risks are endogenous, then risk reduction benefits will be undervalued if both private and collective risk reduction actions are not considered in benefit-cost analysis and program evaluations. Thirdly they show that if environmental risks are endogenous, then environmental and multimedia interdependencies among individuals should be recognized and the implications taken into account in assessing the level of resources devoted to pollution prevention. The report provides an overview of the analytical bases of these arguments and applies them to real world examples.

  • Keywords

    1. Benefits Analysis
    1. Benefits Analysis - Valuation
    1. Benefits Analysis - Valuation - Other
    Environmental Media:
    f. Multimedia
    Shogren, Jason F.
    Crocker, Thomas D.
    EPA Project Officer/ Manager:
    Geographic Area:
    Study Purpose:
    Empirical Application, Methodology Development & Evaluation
    Inventory Record #: EE-0138
  • Participating Organizations

    Research Organization:

    Iowa State University, Department of EconomicsAddress:
    City: Ames State: IA ZIP: 50011
    Phone: Fax:
    Funding Organization:
    Environmental Protection Agency,
    City: Washington State: DC ZIP: 20460
    Phone: Fax:
  • Report Details
    Number of Pages:
    Grant/Contract #:
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    Date Linked: 08/25/2017