Prudential Policies (Guardrail Policies)
Prudential policies, also known as guardrail policies, are a policy approach designed for situations of fundamental uncertainty. This strategy places a very high value on reducing the likelihood of a disastrous outcome, accepting that this may be costly and require forgoing other objectives. It serves as an alternative or supplement to traditional cost-benefit analysis.
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Economics
Economy
Introduction to Macroeconomics Course
Ch.8 Economic dynamics: Financial and environmental crises - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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Policy Shift from Optimization to Prevention due to Tipping Points
Applying Prudential Policies to the Arctic Sea Ice Model
The Paris Agreement as an Example of a Guardrail Policy
Economist's Role in Designing Cost-Effective Guardrail Policies
Consequences of Lacking Guardrail Policies on Climate Stability
A government is considering how to respond to a newly discovered environmental risk. Scientific models are highly uncertain, but they indicate a small possibility of a catastrophic, irreversible collapse of a vital ecosystem. The most effective preventative measures are extremely costly and would significantly reduce short-term economic prosperity. Which of the following policy decisions best reflects a 'guardrail' or 'prudential' approach?
When faced with a potential but uncertain catastrophic outcome, a policymaker using a prudential approach would focus on precisely quantifying the probabilities and expected monetary damages to find the most economically efficient solution.
Policy Response to Systemic Financial Risk
Appropriate Use of Guardrail Policies