Private goods risks

The ability of people to obtain information about private-good risks and take cost-effective precautions against them is illustrated by the public response to radon exposure. Once information about radon exposure risks became public and geologists asserted that the northeastern area of the United States was prone to radon release, companies were quickly started to measure residential radon levels and to install positive pressure systems to keep radon from seeping into basements. 

Proponents of government regulation question the equity and efficiency of information markets. This chapter examines information markets in which chemical risks are private goods (Cross, Byrd, and Lave 1991). 

Because radon exposure varies widely from home to home, exposure information is a private rather than a public good, and a market developed to provide it. Basic information about the risks of radon exposure might be suboptimally provided by private markets, but the determination of exposure and the development of remediation plans are private goods that markets provide. 

Limited knowledge and high transaction costs prevent individuals from developing expertise about many remote risks. So entrepreneurs often fill the gaps. The ability to provide information about the risks of chemical exposure offers many profitable opportunities, as long as the exposure is a private good that varies among individuals. ... 

In the case of chemical exposures that are private goods, government (to the extent that it does anything at all) should limit its activities to the provision of information so individuals can decide for themselves which risks to bear. Command-and-control regulations inhibit the development of robust private information markets because people think that if a product is for sale, the government must have checked it out to ensure that its benefits were greater than its harms. 

Risks are private goods if individuals choose to purchase particular products, work at specific jobs, or live on certain parcels of land. 

This example illustrates the "private-good" nature of many health risks. New studies about radon exposure risks do not alter the example s purpose (Leary 1994 Associated Press 1996 Warner, Mendez, and Courant 1996). 

Commodities are pubKc rather than private goods if their consumption is difficult to restrict to those who pay for them. In the case of chemical exposures, public risks are created through air and water pollution that individuals cannot alter. 

The global interdependence with respect to pharmaceuticals provides powerful reasons for international, legal responses. Because both the risks of disease and the benefits of pharmaceuticals raise global externalities, individuals anywhere have an interest in the appropriate use and allocation of pharmaceuticals everywhere. Both the common good and enlightened self-interest preclude us from concluding that control over and access to pharmaceuticals should be considered as entirely private matters. 

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