Working paper

Acting in the Darkness: Towards some Foundations for the Precautionary Principle

Louise Guillouet, and David Martimort

Abstract

Invoked to guide actions under irreversibility, uncertainty and limited information, the Precautionary Principle states that decision-makers should act cautiously unless the consequences of acts are known. We consider a setting where the stock of past actions, passed a tipping point which remains unknown, increases the probability of a catastrophe. When past acts are observable, decision-makers can reconstruct the whole evolution of stock and beliefs and follow an optimal trajectory. Otherwise, and in accordance with the Precautionary Principle, they act cautiously, remaining too optimistic on their ability to delay the tipping point. This suboptimal behaviour has minor consequences on welfare.

Keywords

Precautionary Principle; Environmental Risk; Tipping Point; Uncertainty and Irreversibility;

JEL codes

  • D83: Search • Learning • Information and Knowledge • Communication • Belief
  • Q55: Technological Innovation

Reference

Louise Guillouet, and David Martimort, Acting in the Darkness: Towards some Foundations for the Precautionary Principle, TSE Working Paper, n. 23-1411, February 2023, revised July 2024.

See also

Published in

TSE Working Paper, n. 23-1411, February 2023, revised July 2024