The Great East Japan Earthquake and its Behavioral Implications: Makoto Saito, Hitotsubashi University

How severe was radiation contamination? 2013/3/19-212

How severe? 2013/3/19-213

How were radioactive substances spread? 2013/3/19-214

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Time series of contamination level 2013/3/19-216

Those who were affected 2013/3/19-217

Economic damages 2013/3/19-218

Economic damages 2013/3/19-219

Consumers’ reaction to radiation contamination 2013/3/

A questionnaire survey on consumers’ responses to radiation-contaminated food 2013/3/  Inquiring about a response to radiation-contaminated milk for  7,600 adults living in the Tokyo metropolitan area in August, 2011  Assume that milk without any contamination is traded at 200 yen per liter. Then, what if it is contaminated?  Still purchases at 200 yen per liter,  Purchases, but discounts it below 200 yen per liter, or  Never purchases.  The government required contamination level to be below 200Bq/liter:  10 Bq/liter?  50 Bq/liter?  100 Bq/liter?  200 Bq/kiter?

Those who purchase, discount, or never purchase 2013/3/

A pattern in disounting 2013/3/

Surprising results! 2013/3/  More than a half of the respondents never purchased contaminated milk even if it was only slightly contaminated.  Even those who discounted contaminated milk never discounted it heavily.  A choice may be between discounting slightly and not purchasing.  However, a careful look at the results leads us to:  Yong women with small children refused to purchase it.  A fraction of the respondents still chose to purchase it with or without discounting.  Why do we observe such heterogeneity?

Some interpretations by the prospect theory 2013/3/

Application of the prospect theory as a behavioral hypothesis 2013/3/  A consumer may over- or under-estimate a probability that an unfavorable event takes places.  Such a bias in risk assessments may trigger a seemingly irrational behavior.

Objective risk Subjective risk 45 degree line A coincidence between objective and subjective risks 2013/3/

2013/3/

Overestimation of small risks 2013/3/

Underestimation of a tiny reduction in risk 2013/3/

Positive assessment of avoiding risk completely, or zero risk 2013/3/

Hesitation to move from status quo in any direction 2013/3/

Coming back to the questionnaire survey… 2013/3/  Avoiding radiation-contaminated milk results in only a slight reduction in cancer risk, or a death probability by death.  Conversely, taking radiation-contaminated milk leads to only a slight increase in cancer risk  Thus, a response to radiation to radiation-contaminated milk may differ between:  Those who perceive own cancer risk to be quite low may be rather averse to even tiny risk, and prefer for zero risk.  Those who perceive own cancer risk to be relatively high may be insensitive to a tiny increase in cancer risk.  The questionnaire survey asked the respondents about own lifetime cancer risk:  No cancer risk: 8.3%  Lower than the national average of lifetime cancer risk (30%): 18.3%  Close to the national average: 36.8%  Above the national average: 16.3%  Unable to judge: 19.9%  No answer: 0.4%

Estimation results and their implications 2013/3/  Who are extremely averse to radiation contamination risk?  Those who perceive own cancer risk to be rather low.  Evidence for strong preference for zero risk  Those who are young with small children.  Who are less averse to radiation contamination risk?  Those who perceive own cancer risk to be relatively high, including the old, heavy smokers, and chronic drinkers.  Policy should take into consideration heterogeneous responses to radiation-contaminated milk.

On the importance of relativity and time-consistency in risk assessment 2013/3/

A relative risk assessment: Risk-risk analysis 2013/3/  Not only radiation contamination, but also other factors are responsible for cancer risk.  Cost effectiveness in reduction of a unit of cancer risk differs substantially among different factors responsible for cancer risk.  Large-scale radiation cleanup may not be cost-effective.  A reduction in a particular risk may result in an increase in another type of risk.

Time-consistency in risk assessment 2013/3/  Time-consistency between ex-ante and ex-post risk assessment  Prior to an unfavorable event, a safety standard tends to be extremely conservative, but it is often relaxed afterwards.  Ordinary citizens may understand that a safety standard is relaxed arbitrarily at the sacrifice of health and safety.  May be better to set a safety standard to be not extremely conservative, but reasonable from the beginning, and keep it even after unfavorable events.  Allowing for heterogeneous responses among consumers beyond a safety standard, which is set reasonably.  Respecting differences in judgments and decisions by each other.

Conclusions 2013/3/  Consider possible catastrophic cases in a reasonable manner even during normal periods.  Understand on-going situations in an objective manner during crisis periods with due consideration for biases in recognition.  Making reasonable judgments:  Compare a particular risk with possible risks.  Keep consistency in assessments between before a crisis and after.