Scientific progress and irreversibility: an economic interpretation of the'Precautionary Principle'

We consider the problem of the optimal use of a good whose consumption can produce damages in the future. Scientific progress is made over time that p rovides information on the distribution of the intensity of damages. We sho w that this progress induces earlier prevention effort only if prudence is larger than twice absolute risk aversion. This paper thus identifies the cl ass of quite restrictive but plausible conditions such that scientific unce rtainties justify an immediate reduction of the consumption of a potentiall y toxic substance. (C) 2000 Elsevier Science S.A.. All rights reserved.