Revealed Preferences: Comments on the Starr Benefit-Risk Relationships

REVEALED PREFERENCES: COMMENTS ON THE STARR BENEFIT-RISK RELATIONSHIPS

Harry J . Otway J . J . Cohen

March 1975

Research Memoranda a r e informal p u b l i c a t i o n s r e l a t i n g t o ongoing or p r o j e c t e d a r e a s of re- search a t IIASA. The views e x p r e s s e d a r e t h o s e o f t h e authors, and do n o t n e c e s s a r i l y reflect t h o s e of IIASA.

REXTUED PFEFERENCES: COMMENTS ON THE STARR BENEFIT-RISK RELATIONSHIPS+

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Harry J. Otway J. J. Cohen

Abstract

S o c i e t a l preferences r e l a t e d t o r i s k acceptance form an important input i n t o decisions a f f e c t i n g t h e s e l e c t i o n and deployment of large- s c a l e technological systems. These preferences may be determined e i t h e r by psychometric survey techniques o r through t h e a n a l y s i s of recorded s t a t i s t i c a l data. The l a t t e r method, revealed preferences, has been used, most notably by S t a r r , t o derive mathematical re- l a t i o n s h i p s between s o c i e t a l b e n e f i t and technological risk. I n t h i s paper t h e m e r i t s of t h e revealed preference approach a r e summarized and t h e v a l i d i t y of t h e S t a r r q u a n t i t a t i v e r e s u l t s i s examined. It i s concluded t h a t these r e s u l t s a r e excessively s e n s i t i v e t o t h e assumptions made and t h e handling of d a t a and t h a t t h e existence of simple mathematical r e l a t i o n s h i p s , based upon t h e revealed preferences method, i s unlikely. Plans f o r f u r t h e r research i n determining s o c i e t a l preferences a r e outlined.

INTRODUCTION

A s technological systems have increased i n s i z e they have o f f e r e d increasingly a t t r a c t i v e s o c i e t a l benefits, However, with t h i s increase i n s c a l e t h e negative side-effects of technology have a l s o become more noticeable

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a s r e f l e c t e d i n t h e environ- mental concerns of recent years. Plans f o r f u r t h e r progress a r e o f t e n being met by a v a r i e t y of individual and group demands f o r c l o s e r examination of t h e b e n e f i t s and r i s k s of technologies;

a t t i t u d e s which regard much t h a t i s innovative as being p o t e n t i a l l y harmful a r e being observed,

Thus decisions involving t h e s e l e c t i o n and deployment of large-scale technologies have taken on an increased importance,

Y The views expressed i n t h i s paper a r e those of t h e authors, and do not n e c e s s a r i l y r e f l e c t those of t h e Project Sponsors.

Wt I n t e r n a t i o n a l Atomic Energy Agency, J o i n t IAEA/IIASA Research P r o j e c t , P.O. Box 590, Vienna, Austria,

h t h s o c i e t a l a t t i t u d e s and a n t i c i p a t e d responses forming a v i t a l input i n t o decision making. A model i l l u s t r a t i n g t h e importance of r i s k perception and s o c i e t a l preferences i n t h i s process has been reported i n an e a r l i e r publication (Otway, 1975).

There a r e b a s i c a l l y two methods f o r determining pre-

ference s on t h e s o c i e t a l l e v e l : psychometric survey techniques;

and t h e revealed preferences approach, which r e l i e s upon t h e a n a l y s i s of recorded s t a t i s t i c a l data. The l a t t e r method t r i e s t o e x t r a c t from h i s t o r i c a l d a t a preferences revealed, e x p l i c i t l y o r i m p l i c i t l y , i n past s o c i e t a l - l e v e l decisions and attempts t o describe a normative pat t e r n f o r these decisions.

One of t h e b e t t e r known a p p l i c a t i o n s of t h e revealed pre- ferences approach, as r e l a t e d t o technological r i s k s , i s t h a t of S t a r r (1969,

1971,

1974) who, through t h i s pioneering work, was instrumental i n s t i m u l a t i n g i n t e r e s t i n t h e general f i e l d of

applied risk-benefit a n a l y s i s and i n opening new l i n e s of enquiry.

The o b j e c t i v e of t h e S t a r r work w a s t o e s t a b l i s h a s e t of hypo- t h e s e s and c r i t e r i a which c o u l d b e used f o r national decisions regarding t h e acceptable l e v e l of r i s k associated with large- s c a l e technological systems. H i s t o r i c a l p a t t e r n s (revealed preferences) were sought which might suggest broad p r i n c i p l e s f o r t h i s purpose and s e v e r a l b a s i c mathematical r e l a t i o n s h i p s between s o c i a l b e n e f i t and technological r i s k s were suggested

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with some q u a l i f i c a t i o n s a s t o t h e i r v a l i d i t y and t h e l i m i - t a t i o n s of t h e method. These papers have been f r e q u e n t l y c i t e d , o f t e n with i n s u f f i c i e n t q u a l i f i c a t i o n , with t h e quanti- t a t i v e r e l a t i o n s h i p s sometimes appearing t o be regarded as a

s e t of "quasi-laws" describing human behaviour i n r i s k s i t u a t i o n s . One of our e a r l y research t a s k s w a s t o c r i t i c a l l y review methods f o r t h e determination of s o c i e t a l preferences. I n l i g h t of t h e inherent l i m i t a t i o n s found i n t h e method of revealed

preferences we were s t r u c k by t h e r a t h e r neat mathematical r e s u l t s obtained by S t a r r through t h i s approach. This, i n t u r n , l e a d s t o a more d e t a i l e d examination of t h e q u a n t i t a t i v e c o r r e l a t i o n s themselves. The i n t e n t of t h i s paper i s t o summarize some l i m i t a t i o n s of t h e revealed preferences approach (Section I1 )

,

t o o u t l i n e t h e r e s u l t s and methodology of t h e S t a r r work (Section 111), and, i n Section I V , t o review b a s i c premises and t o attempt reproduction of t h e r e s u l t s . Conclusions a r e presented i n Section V.

11. REVEALED PREFERENCES

- ^GENERAL

^COMMENTS

This approach has t h e obvious advantage of d e a l i n g with a c t u a l s o c i e t a l decisions which have been made, e x p l i c i t l y o r i m p l i c i t l y , i n t h e r e a l world and i s f r e e from t h e a r t i f i c i a l i t i e s of t h e laboratory. However, t h e a p p l i c a t i o n of t h i s method re-

q u i r e s t h a t s e v e r a l assumptions be made which l e a d t o t h e dis- advantages summarized below:

1. Past is Prologue. This i s t h e core of t h e assumption t h a t s o c i e t a l a t t i t u d e s revealed i n t h e past can be applied i n t h e f u t u r e . While t h i s may be t r u e i n some c a s e s , e s p e c i a l l y f o r s h o r t time periods, s o c i e t y i s changing r a p i d l y

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p r e c i s e l y because of technological development. This assumption i s open t o question.

2. Multiple Determination. Preferences r e l a t e d t o r i s k acceptance a r e multiply determined) t h a t i s , many f a c t o r s i n f l u e n c e a t t i t u d e s toward r i s k . It i s not c l e a r t h a t a l l a r e even known, l e t alone recorded i n t h e d a t a base.

For example, i n d i v i d u a l and s o c i e t a l acceptance of r i s k i s , i n general, predicated upon how r i s k s a r e perceived, not by a c t u a l r i s k l e v e l s ; i t i s known t h a t man i s a poor i n t u i t i v e s t a t i s t i c i a n i n t h i s respect

( ~ l o v i c , 1971; Murphey and Winkler, 1973). Recorded s t a t i s t i c a l d a t a reveal a c t u a l l e v e l s of r i s k ; how r i s k s and b e n e f i t s were perceived at t h e time cannot be r e f l e c t e d i n t h e s e d a t a , nor can t h e socio-psycho- l o g i c a l mechanisms t h a t determined perception be re- corded.

R a i f f a (1968) has pointed out t h e importance of in- format i o n q u a l i t y . People have made t h e d e c i s i o n s which generated t h e recorded d a t a on t h e b a s i s of imperfect information. Decisions made i n t h e f u t u r e , even i f a l l o t h e r conditions were constant,

mw

be

made with b e t t e r o r worse information and, t h e r e f o r e , w i l l not n e c e s s a r i l y reproduce past outcomes.

3. Importance of Physical Risks. More s p e c i f i c t o t h e S t a r work, which emphasizes physical ( e s p e c i a l l y m o r t a l i t y ) - r i s k s , is t h e observation t h a t t h e s e r i s k s do not always play a dominant r a l e i n t h e acceptance of a new technology. Risks a r e o f t e n taken f o r s o c i a l reasons, such a s p r e s t i g e , e t c . , and i n t h e search f o r psychic b e n e f i t s thoughts of physical r i s k may be subordinate t o , f o r example, s o c i a l r i s k s .

#

These p o i n t s summarize the p r i n c i p a l arguments against using t h e revealed p r e f e r e n c e s approach f o r determining v a l i d s o c i e t a l p r e f e r e n c e s r e l a t e d t o r i s k acceptance. However, as mentioned e a r l i e r , S t a r r has p o s t u l a t e d some b a s i c mathematical r e l a t i o n - s h i p s between s o c i e t a l b e n e f i t and technological r i s k u s i n g t h i s method; h i s work w i l l be summarized i n t h e next section.

111. SUMMARY OF THE STARR WORK

I n t h i s s e c t i o n t h e important points of t h e S t a r r conclusions w i l l be repeated and t h e methods used i n t h e i r d e r i v a t i o n reviewed.

This treatment i s n e c e s s a r i l y b r i e f

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readers a r e encouraged t o study one of t h e o r i g i n a l papers ( S t a r r , 1969, 1971, 1974) f o r a more

complete exposition. The 1969 paper w i l l be used f o r t h i s discussion a s i t formed t h e b a s i s f o r t h e l a t e r work and t h e r e s u l t s were not changed appreciably.

A. The Assumptions

The S t a r r work p r e s e n t s 91an approach f o r e s t a b l i s h i n g a q u a n t i t a t i v e measure of b e n e f i t r e l a t i v e t o cost f o r an important

element i n our spectrum of s o c i a l values

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s p e c i f i c a l l y , f o r a c c i d e n t a l deaths a r i s i n g from technological developments i n public use. The a n a l y s i s i s based upon two assumptions:"

1.

". .. ..

t h a t h i s t o r i c a l n a t i o n a l accident records a r e adequate f o r r e v e a l i n g consistent p a t t e r n s of f a t a l i t i e s i n t h e public use of technology."

2. I1

...

t h a t such h i s t o r i c a l l y revealed s o c i a l preferences and c o s t s a r e s u f f i c i e n t l y enduring t o permit t h e i r use f o r p r e d i c t i v e purposes."

The above quotes a r e from t h e 1969 paper and were paraphrased i n t h e

1971

and

1974

papers.

B. The 1969 9'Conclusions'1

*

" ( i ) The i n d i c a t i o n s a r e t h a t t h e public i s w i l l i n g t o accept voluntary^ r i s k s roughly 1000 times g r e a t e r t h a t 'in- voluntary1 r i s k s .

( i i ) The s t a t i s t i c a l r i s k of death from d i s e a s e appears t o be a psychological y a r d s t i c k f o r e s t a b l i s h i n g t h e l e v e l of a c c e p t a b i l i t y of o t h e r r i s k s .

( i i i ) The a c c e p t a b i l i t y of r i s k appears t o be crudely pro- p o r t i o n a l t o t h e t h i r d power of the b e n e f i t s ( r e a l o r imagined)

. . .

^II

Y S t a r r d i d not use t h e word conclusions i n d i r e c t a s s o c i a t i o n with these r e l a t i o n s h i p s . I n t h e 1969 paper they appeared i n a s e c t i o n headed "Conclusionsw and i n a l l t h r e e publications were r e f e r r e d t o a s " i n t e r e s t i n g point sN.

These t h r e e points were repeated, i n a somewhat d i f f e r e n t form, i n t h e 1971 and 1974 papers. Further p o i n t s addressing t h e f a c t o r s influencing public awareness, t h e a c c e p t a b i l i t y of nuclear power and t h e significance of n a t u r a l haSard r i s k s l e v e l s i n acceptance w i l l not be discussed here,

C. The Methodology and Results

The i n t e n t here i s t o b r i e f l y follow through t h e metho- dology and d a t a presentations used i n reaching t h e p o i n t s l i s t e d above. The f i g u r e s a r e presented i n t h e same order followed by Starr.

1, Risk proportional t o ( b e n e f i t ) 3

.

There a r e two b a s i c sources f o r t h i s r e s u l t : mining wages and s o c i e t a l a c t i v i t i e s , It was noted t h a t

accident r a t e s f o r miners, exposed t o high occupational r i s k s , were a function of t h e wage, roughly t h e t h i r d power r e l a t i o n s h i p shown i n Figure 1.

Risks and b e n e f i t s were then estimated f o r s e v e r a l

voluntary and involuntary s o c i e t a l a c t i v i t i e s (Figure 2 ) and t h e third-power r e l a t i o n s h i p between b e n e f i t and r i s k c h a r a c t e r i s t i c s was again s a i d t o be observed.

2. Acceptability of voluntary r i s k s

-

1000 timels t h a t of i n - volunt ary risks.

The curves of Figure 2 f o r voluntary and involuntary r i s k s show an approximate separation of t h r e e orders of magnitude, t h u s providing t h e b a s i s f o r t h i s point.

3. The s t a t i s t i c a l r i s k of death from disease a s a psycho- l o g i c a l y a r d s t i c k f o r a c c e p t a b i l i t ~ ,

Several f i g u r e s were presented (such a s Figure 3) which i l l u s t r a t e d t h a t p a r t i c i p a t i o n i n a c t i v i t i e s

(cog.,

auto- motive t r a v e l , commercial a v i a t i o n ) increased as t h e associated r i s k s decreased, Discussing Figure 3 i t was s a i d : "It i s i n t e r e s t i n g t o note t h a t t h e present r i s k l e v e l i s only s l i g h t l y below t h e b a s i c l e v e l of r i s k from disease. I n view of t h e high percentage of t h e population involved, t h i s probably represents a t r u e s o c i e t a l jud ement on t h e a c c e p t a b i l i t y of r i s k r e l a t e d t o benefit"

f

S t a r r , 1969,

1971,

1974).

IV. EVALUATION AND REPROWCEXBILITY OF THE STARR RESULTS

This s e c t i o n w i l l examine t h e v a l i d i t y of t h e foregoing appli- c a t i o n of t h e revealed preferences technique by repeating t h e a n a l y s i s

o u t l i n e d i n Section 111. C., using the same d a t a base. No changes i n methodology o r c a l c u l a t i o n w i l l be made.

1. Risk proportional t o ( b e n e f i t ) j a. Mining Wages

Figure 1 i n d i c a t e d a cubic r e l a t i o n s h i p between miners'wages and occupational r i s k s . Otway (1973) pointed out t h a t t h e t o t a l wage should not be viewed a s r i s k compensation; workers exposed t o minimal occupational r i s k s t i l l receive a wage f o r b a s i c services. A review of wage s c a l e s f o r bituminous coal mining i n d i c a t e s t h a t an average compensation f o r b a s i c sertiices i n 1967 was about $ 2.00 per hour (U.S. Dept. of Labor, 1967). References i n wage and s a l a r y administration ( O t i s and Leukart, 1954; National Metal Trades, 1974) i n d i c a t e t h a t , i n e s t a b l i s h i n g i n d u s t r i a l wage s c a l e s , job hazard

accounts a t most f o r 10

5

of t o t a l wages. Subtracting $ 2.00 per hour from t h e wages of f i g u r e 1 t o form " r i s k compensation"

wages, i n d i c a t e s an e s s e n t i a l l y l i n e a r r e l a t i o n s h i p between r i s k and benefit. Figure 4 shows a comparison between r i s k compensation wage and the t o t a l wage d a t a of Figure 1 with regression l i n e s .

A f u r t h e r review of mining wage d a t a (u.s. Dept. of Labor, 1967) i n d i c a t e s t h a t wages i n l a r g e r coal mines were generally higher than i n smaller mines, although t h e smaller mines had higher accident r a t e s . This a l s o implies t h e e f f e c t of v a r i a b l e s other than r i s k upon wages.

Connoly and Mamr (1971), using t h e S t a r r aggregate wage approach, included d a t a from other mining i n d u s t r i e s and various S t a t e s of t h e USA. With t h e s e a d d i t i o n a l d a t a p o i n t s they concluded t h a t t h e I8inf erence of a general t hird-power r e l a t i o n s h i p , o r any r e l a t i o n s h i p , does not appear t o be justified".

b, S o c i e t a l A c t i v i t i e s (~01untarr;y)

Having gained t h e impression from t h e foregoing t h a t a third-power r e l a t i o n s h i p between b e n e f i t and r i s k does not n e c e s s a r i l y e x i s t , t h e third-power r e l a t i o n s h i p shown i n figure 2 may be investigated. The o r i g i n a l voluntary r i s k d a t a , taken d i r e c t l y from Figure 2, a r e f i t t e d best t o a regression equation i n d i c a t i n g r i s k t o be proportional t o b e n e f i t t o t h e

1.8

power.

h he

o r i g i n a l S t a r r d a t a and t h e regression l i n e a r e shown i n Figure 5.)

c, S o c i e t a l A c t i v i t i e s ( ~ n v o l u n t a r y )

The "involuntary" curve of Figure 2 c o n s i s t s of f o u r d a t a points: motor vehicles, commercial a v i a t i o n , e l e c t r i c power and n a t u r a l hazards ( ~ t a r r , 1975). The appendices of t h e

S t a r r papers i n d i c a t e t h a t no b e n e f i t w a s assigned t o t h e n a t u r a l hazards p o i n t , t h e r e f o r e , i t w a s a r b i t r a r i l y placed

a1 ong t h e b e n e f i t axis.

Disregarding n a t u r a l hazards, a r e g r e s s i o n l i n e may be f i t t e d t o t h e remai i n g o r i g i n a l data. This y i e l d s an equation of t h e form R B203

-

a s i x t h power r e l a t i o n s h i p f o r involuntary r i s k s . ( s e e Figure

5 ) .

2. A c c e p t a b i l i t y of voluntary r i s k s -1000 times t h a t of involuntary r i s k s . Although i t appears t h a t an element of personal c o n t r o l over

outcome and t h e p o s s i b i l i t y of avoiding r i s k exposure (i.e., voluntary r i s k t a k i n g ) play an important p a r t i n r i s k acceptance, any numerical r e l a t i o n s h i p between voluntary and involuntary r i s k acceptance, based upon t h e S t a r r d a t a (shown with f i t t e d curves i n Figure

5 ) ,

where t h e r e l a t i o n s h i p s f o r voluntary and involuntary a c t i v i t i e s i n t e r s e c t , would seem speculative.

3.

The s t a t i s t i c a l r i s k of death from d i s e a s e as a psychological y a r d s t i c k f o r a c c e p t a b i l i t y .

A s discussed e a r l i e r ( s e c t i o n 111. C. 3) curves such as f i g u r e

3

were used t o show t h a t p a r t i c i p a t i o n i n many a c t i v i t i e s i n c r e a s e d as r i s k s decreased with "a t r u e s o c i e t a l judgement on t h e a c c e p t a b i l i t y of r i s k i n r e l a t i o n t o benefit" being reached as p a r t i c i p a t i o n be- came v i r t u a l l y u n i v e r s a l and r i s k l e v e l l e d at a value near t h a t t o death from n a t u r a l causes.

While t h i s may be t r u e , although t h e mechanism i s not obvious, curves such as Figure

3

do not demonstrate a cause-effect r e l a t i o n - s h i p between p a r t i c i p a t i o n and risk. S t a r r d i d not claim t h a t

cause-effect had been shown but t h i s impression could be obtained from t h e f i g u r e s . P a r t i c i p a t i o n i n risk-bearing a c t i v i t i e s i s m u l t i p l y determined; o t h e r v a r i a b l e s b e s i d e s r i s k l e v e l s , e.g., economic, may a l s o influence p a r t i c i p a t i o n . This century has been a time of g r e a t s o c i a l change i n t h e U.S.A., a period of i n d u s t r i a l i z a t i o n and i n c r e a s i n g personal wealth. Figure

6

shows, f o r example, a p l o t of disposable personal income and p a r t i c i p a t i o n i n automotive t r a v e l vs. time. It may be observed t h a t i n t h e period when

automotive p a r t i c i p a t i o n increased by a f a c t o r of

7

o r so, personal disposable income, i n constant d o l l a r s , increased by a f a c t o r of about 4. It i s not unreasonable t o hypothesize t h a t as incomes increased t h e automobile was economically w i t h i n t h e reach of more people, t h u s i n c r e a s i n g p a r t i c i p a t i o n . The point here i s

-

^{not t o}

p o s t u l a t e an a l t e r n a t i v e cause-effect r e l a t i o n s h i p but t o suggest t h a t any hypothesis about p a r t i c i p a t i o n i n such a c t i v i t i e s being s t r o n g l y influenced by r i s k l e v e l s approaching t h a t from n a t u r a l causes should not be regarded as conclusive.

4.

General Remarks.

The number of s t a t i s t i c a l v a r i a b l e s recorded i s l i m i t e d and i t i s , t h e r e f o r e , necessary t o make a number of assumptions i n performing such analyses. Using e q u a l l y reasonable, but d i f f e r e n t , assumptions could produce q u i t e d i f f e r e n t results

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e s p e c i a l l y with regard t o Figure 2. This has not been done here; t h e o r i g i n a l d a t a f o r voluntary and involuntary a c t i v i t i e s have merely been f i t t e d t o computer-determined power curves i n order t o o b j e c t i v e l y t e s t t h e appropriateness of t h e q u a n t i t a t i v e c o r r e l a t i o n s .

The r e a d e r may wish t o examine some of these o r i g i n a l d a t a p o i n t s i n d e t a i l i n order t o g e t an i d e a of t h e u n c e r t a i n t i e s introduced through some of t h e assumptions necessary t o compensate f o r inadequacies i n t h e d a t a base. For example, t h e S t a r r method f o r determining t h e s o c i e t a l b e n e f i t of e l e c t r i c a l power i s based upon t h e p o s s i b l e change i n p e r c a p i t a CNP i f e l e c t r i c i t y were n o t a v a i l a b l e . I n view of t h e c o r r e l a t i o n between energy consumption and GNP, and t h e assumption t h a t 35

$

of t h e energy consumed i n t h e USA i s used t o produce e l e c t r i c i t y , S t a r r assigned a per

c a p i t a b e n e f i t of about $ 1,000 t o e l e c t r i c power (almost 25 $ of t h e U.S. per c a p i t a GNP). An a l t e r n a t i v e value may be suggested through a somewhat d i f f e r e n t approach: The U.S. S t a t i s t i c a l A b s t r a c t s (1973) i n d i c a t e t h a t t h e U.S. gross product f o r " E l e c t r i c i t y , Gas and S a n i t a r y Services" i s $ 25,000 m i l l i o n . Even i f t h i s were a l l a t t r i b u t e d t o e l e c t r i c i t y t h e per c a p i t a b e n e f i t would be only about $ 100. This i s not t o imply t h a t one number o r method i s c o r r e c t and t h e o t h e r i n c o r r e c t

-

only t o show t h a t d i f f e r e n t assumptions can produce r a t h e r l a r g e changes i n t h e l o c a t i o n of d a t a points.

E'inally, i t must be observed t h a t t h e d a t a of Figures 2 and

5

do not r e a l l y j u s t i f y t h e use of computer-fitted curves which, due t o t h e l i m i t e d number of d a t a p o i n t s , a r e extremely s e n s i t i v e t o a change i n l o c a t i o n of a s i n g l e point. Regression analyses were used s o l e l y t o o b t a i n an i m p a r t i a l t e s t of t h e cubic r e l a t i o n - s h i p s which had been postulated. It seems d i f f i c u l t t o o b t a i n adequate information on a s i g n i f i c a n t l y l a r g e number of s o c i e t a l a c t i v i t i e s t o allow broad g e n e r a l i z a t i o n s of t h e type sought by S t a r r . This appears t o be another l i m i t a t i o n of t h e method.

V. CONCLUSIONS

I t must again be emphasized t h a t t h e i n t e n t of t h i s paper w a s not t o q u e s t i o n t h e value of t h e S t a r r work i n general, but merely t o t e s t t h e v a l i d i t y of q u a n t i f i e d r i s k - b e n e f i t c o r r e l a t i o n s based upon t h e method of revealed preferences. S t a r r himself d i d not place a g r e a t d e a l of s t r e s s upon t h e v a l i d i t y of t h e r e l a t i o n s h i p s themselves

-

^as may be seen by t h e caveats he q u i t e properly placed i n h i s papers. Our concern was t h a t , due t o encouragement given by t h e e l e g a n t s i m p l i c i t y of t h e mathematical r e s u l t s , t o o much r e l i a n c e i s being placed on h i s t o r i c a l s t a t i s t i c a l d a t a alone a s a source of revealed s o c i e t a l preferences.

It i s concluded t h a t t h e r e s u l t s of t h i s method appear t o be excessively s e n s i t i v e t o t h e assumptions made and t h e handling of data; t h e present existence of any such mathematical risk-benefit r e l a t i o n s h i p s , based upon t h i s approach, would seem unlikely.

There i s c l e a r l y some r e l a t i o n s h i p between t h e b e n e f i t per- ceived t o be derived from an a c t i v i t y and t h e perceived c o s t s of p a r t i c i p a t i o n . The r e l a t i o n s h i p s a r e , however, not simple mathe- matical ones but complicated and s t r o n g l y influenced by socio- psychological mechanisms which a r e a s y e t not well understood.

The research programme of t h e J o i n t IAEA/IIASA Research Project includes the expansion of t h e revealed preferences approach using an i t e r a t i v e process of empirical, multi-variable a n a l y s i s combined with behavioural theories. These analyses w i l l a l s o help t o define i n p u t s t o a p a r a l l e l e f f o r t i n t h e design and a p p l i c a t i o n of psychometric surveys. This research has been described i n an e a r l i e r publication ( ~ t w a y , 1975) and i s d i r e c t e d at i d e n t i f y i n g t h e f a c t o r s influencing the perception and accept- ance of technological r i s k s i n order t h a t s o c i e t a l a t t i t u d e s and a n t i c i p a t e d responses m v be b e t t e r i n t e g r a t e d i n t o decision making.

Aclmowl edgement

The authors would l i k e t o thank Chauncey S t a r r and Ric Fudman of the E l e c t r i c Power Research I n s t i t u t e , Palo Alto, C a l i f o r n i a , USA, f o r t h e i r comments upon an e a r l i e r d r a f t of t h i s publication.

2.00 2.50 3.0 0 3.50 4.00 4.50 HOURLY WAGE (DOLLARS)

FIGURE 1

Mining Accident Rates v s . Incentive ( Starr 1969,1971,1974 )

%

ra-9

-

LL

-

_R

_{= Risk}

d-

6 =

Berlefit

I I I I I

200

r - 1 _ 1 - - ~ - ~

500 1000 2 000 5 000 10 GC3

Average annual benetit / person involved [ Dsllars 1

FIGURE 2

R i s k v s . Benefit: Voluntary and Involuntary E x p o s u r e ( S t a r r 1969, 1971, 1974).

1900 1920 1940 1960 YEAR

FIGURE 3

R i s k and P a r t i c i p a t i o n T r e n d s f o r M o t o r Vehicles ( S t a r r 1969, 1971, 1974).

COMPENSATION ( DOLLARS/ HOUR)

FIGURE 4

Mining Accident R a t e s vs. T o t a l Wage and R i s k Corn pens a t ion

FIGURE 5

Risk v s . Benefit : R e g r e s s i o n Lines f o r Voluntary and Involuntary Exposure ( original S t a r r data ₎

Y E A R

FIGURE 6

Disposable Personal Income and Participation Trends f o r Motor Vehicles.

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