I have just been asked whether policy makers should use the proactionary or precautionary principle when it comes to evaluate an innovation. I find that an interesting question and if you do, too, then read on.

The precautionary principle says one should prevent the worst outcomes. For example, when we talk about the historic development of nuclear energy, then the precautionary principle suggests we should avoid using nuclear energy as the damage from a large-scale nuclear incident are enormous. In contrast, the proactionary principle suggests that the best available opportunities should be used. In our example of nuclear energy, we would find that the proactionary principle would support the development of nuclear energy as it (at least used to be) one of the cheapest and most stable sources of energy production.

The way both principles should be understood is that the precautionary principle sees the downside of a gamble only, while the proactionary principle, in its most liberalist interpretation, focused on the upside of a gamble. In other words, the precautionary principle views risk as a threat, while the proactionary principle understands risk as an opportunity. Clearly, the proactionary principle does not (necessarily) take into account the potential negative side effects, while the precautionary principle focuses (mostly) on these.

The question, of course, should be what the exact implication of an innovation is. Is it something good or something bad? If one refers to the proactionary and precautionary principles jointly, then one assumes an innovation has some potentially negative side effects (such as pollution or health impacts), but we are unsure about the importance of these. In contrast, companies tend to be rather certain about the potential benefits of an innovation.

For example, without the invention of the steam engine we would not have seen the level of development that we have right now. At the same time, without the steam engine, we would unlikely be facing the problem of climate change. While the proactionary principle suggests that the former should outweigh the latter (innovation will keep us safe from the hazards of climate change), the precautionary principle suggests exactly the other way around (we should keep earth’s warming to a safe level, e.g. less than 1.5°C).

Of course, if the costs are extremely large, such as a potential large-scale disaster that destroys the planet as we know it, then it is clear that the precautionary principle should be used. Instead, if it seems initially that the hazards are unlikely to be important, then the proactionary principle should be applied. However, that only means that we are anyway already aware of the fact that the potential benefits of an innovation outweigh the costs. In this case, there seems like use in applying the precautionary principle.

Yet, as one may argue, in most cases we have some hints about potential damages, or costs, from an innovation, and an approximate idea of the benefits. In general, we tend to have a better understanding of the benefits than of the costs, which tends to bias policy makers towards allowing the development of innovations. This can be good, but it can turn out to have devastating consequences. For example, lead in petrol or paint was used for a long time until it was proven that the health impacts are enormous. Fluorine-chlorine hydrocarbons were used in fridges or spray bottles until it was noticed that this is bad for the ozone layer. In both cases did governments react and retrospectively applied the precautionary principle and banned the use of these substances.

In some cases this turns out to be a much more difficult political dilemma. For example, Polytetrafluoroethylene (PTFE), i.e. Teflon, is still being used widely despite the knowledge that carbon-fluorine particles are now found in approximately every corner and living organism of this world. One can make the same point for plastic. Plastic waste is covering enormous areas of our oceans, and microplastic particles are found around everywhere these days. We are still unsure about the health impacts, but it seems unlikely that the health and ecosystem impacts of both PTFE and microplastic are anything but negligible. Despite this knowledge, our consumption and production is currently so strongly focused on PTFE and microplastic that policy makers are not even discussing about phasing out these large-scale pollutants. In these cases, the long-term negative impacts of having relied upon the use of the proactionary principle may be catastrophic. In fact, a recent report of the European Environmental Agency has shown that shifting public policy towards avoiding harm, even at the cost of some false alarms, is worthwhile.

To be honest, if you ask an economist, then the whole debate about the precautionary principle vs the proactionary principle is, in most cases, a bit misplaced. We should simply rely on a cost-benefit analysis, which compares the benefits of an innovation with its potential costs. If the benefits outweigh the costs, then the innovation should be pursued, while if the potential costs outweigh the benefits, then the innovation should be stopped. This approach does not have a biased view of risk and, most importantly, used all available information.

A final word of caution: as the costs of an innovation tend to be more uncertain than the potential benefits, it is always more likely that an innovation gets approved by a policy maker on the basis of the proactionary principle. That problem intensifies if there is competition with other countries or regions, and an inherent first-mover advantage attached to an innovation. In this case, the decisions becomes much more driven by political ideologies and interests, by lobbying groups and financial incentives than anything else. Companies who want to develop innovations are unlikely to do a full health impact first, as one can see in the case of chemical companies. This is clearly a mistake. Sometimes the world does better by waiting a little and researching more about potential costs than liberally rushing into a disaster that is motivated by purely financial payoffs.