2 - Private Information in the Regulation of Risk

Summary

This chapter sets the stage for the remainder of the book by providing a broad overview of the sorts of information asymmetries that exist between producers of potentially dangerous products and those who are tasked with regulating them. Leveraging insights from a diverse set of industries -- aerospace, direct-to-consumer products, pharmaceuticals, and industrial chemicals -- and spanning a wide range of countries, this chapter establishes the surprising degree to which regulators not only are at a disadvantage relative to firms when it comes to acquiring information about product risk but also, as a result, depend on firms to be the primary source of information required to regulate. The chapter then investigates the conditions under which this might allow producers to influence the timing and direction of regulatory change. After establishing the pervasiveness of information asymmetries and dependencies at the domestic level, as well as the resulting opportunities for regulatory bias, the chapter demonstrates why we should expect the very same information asymmetries and biases to be replicated and even exacerbated at the international level.