The Great East Japan Earthquake and its Behavioral Implications:

1. The Great East Japan Earthquake and its Behavioral Implications: Makoto Saito, Hitotsubashi University

2. How severe was radiation contamination?

3. How severe?

4. How were radioactive substances spread?

6. Time series of contamination level

7. Those who were affected

8. Economic damages

9. Economic damages

10. Consumers’ reaction to radiation contamination

11. A questionnaire survey on consumers’ responses to radiation-contaminated food • Inquiring about a response to radiation-contaminated milk for • 7,600 adults living in the Tokyo metropolitan area in August, 2011 • Assume that milk without any contamination is traded at 200 yen per liter. Then, what if it is contaminated? • Still purchases at 200 yen per liter, • Purchases, but discounts it below 200 yen per liter, or • Never purchases. • The government required contamination level to be below 200Bq/liter: • 10 Bq/liter? • 50 Bq/liter? • 100 Bq/liter? • 200 Bq/kiter?

12. Those who purchase, discount, or never purchase

13. A pattern in disounting

14. Surprising results! • More than a half of the respondents never purchased contaminated milk even if it was only slightly contaminated. • Even those who discounted contaminated milk never discounted it heavily. • A choice may be between discounting slightly and not purchasing. • However, a careful look at the results leads us to: • Yong women with small children refused to purchase it. • A fraction of the respondents still chose to purchase it with or without discounting. • Why do we observe such heterogeneity?

15. Some interpretations by the prospect theory

16. Application of the prospect theory as a behavioral hypothesis • A consumer may over- or under-estimate a probability that an unfavorable event takes places. • Such a bias in risk assessments may trigger a seemingly irrational behavior.

17. A coincidence between objective and subjective risks Subjective risk 45degree line Objective risk

19. Overestimation of small risks

20. Underestimation of a tiny reduction in risk

21. Positive assessment of avoiding risk completely, or zero risk

22. Hesitation to move from status quo in any direction

23. Coming back to the questionnaire survey… • Avoiding radiation-contaminated milk results in only a slight reduction in cancer risk, or a death probability by death. • Conversely, taking radiation-contaminated milk leads to only a slight increase in cancer risk • Thus, a response to radiation to radiation-contaminated milk may differ between: • Those who perceive own cancer risk to be quite low may be rather averse to even tiny risk, and prefer for zero risk. • Those who perceive own cancer risk to be relatively high may be insensitive to a tiny increase in cancer risk. • The questionnaire survey asked the respondents about own lifetime cancer risk: • No cancer risk: 8.3% • Lower than the national average of lifetime cancer risk (30%): 18.3% • Close to the national average: 36.8% • Above the national average: 16.3% • Unable to judge: 19.9% • No answer:0.4%

24. Estimation results and their implications • Who are extremely averse to radiation contamination risk? • Those who perceive own cancer risk to be rather low. • Evidence for strong preference for zero risk • Those who are young with small children. • Who are less averse to radiation contamination risk? • Those who perceive own cancer risk to be relatively high, including the old, heavy smokers, and chronic drinkers. • Policy should take into consideration heterogeneous responses to radiation-contaminated milk.

25. On the importance of relativity and time-consistency in risk assessment

26. A relative risk assessment: Risk-risk analysis • Not only radiation contamination, but also other factors are responsible for cancer risk. • Cost effectiveness in reduction of a unit of cancer risk differs substantially among different factors responsible for cancer risk. • Large-scale radiation cleanup may not be cost-effective. • A reduction in a particular risk may result in an increase in another type of risk.

27. Time-consistency in risk assessment • Time-consistency between ex-ante and ex-post risk assessment • Prior to an unfavorable event, a safety standard tends to be extremely conservative, but it is often relaxed afterwards. • Ordinary citizens may understand that a safety standard is relaxed arbitrarily at the sacrifice of health and safety. • May be better to set a safety standard to be not extremely conservative, but reasonable from the beginning, and keep it even after unfavorable events. • Allowing for heterogeneous responses among consumers beyond a safety standard, which is set reasonably. • Respecting differences in judgments and decisions by each other.

28. Conclusions • Consider possible catastrophic cases in a reasonable manner even during normal periods. • Understand on-going situations in an objective manner during crisis periods with due consideration for biases in recognition. • Making reasonable judgments: • Compare a particular risk with possible risks. • Keep consistency in assessments between before a crisis and after.