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Learning about risk: Consumer and worker responses to hazard information
152
Book twxews
does not apply to the other chapters, the results on the attitudes towards income (in)equality itself are more interesting and convincing. As a conclusion we may say that Szirmai’s book reflects all the assets and liabilities that are normally associated with a doctoral dissertation. Inequality Observed is a research report for those who are active in (or wish to enter) the field of study under concern. It presents data, raises questions, gives few answers. To quote the author: ‘I have tried to present the data themselves in such a fashion that the reader can reach his own conclusions and can contrast his own interpretations with those presented here’. I personally found this very stimulating. Bert Overlaet Dept. of Psychology Catholic University of Leuven Tiensestraat 102 B-3000 Leuven Belgium
WK. Viscusi and W.A. Magat (eds.), Learning About Risk: Consumer and Worker Responses to Hazard Information. Harvard University Press, Cambridge, MA, 1987. pp. 130 + 45 append. $32.95. The goal of the book is stated to provide ‘ . . . empirical evidence on the impact of hazard warnings other than what can be extrapolated from case studies and from our general knowledge of human behavior’ (p. v). The target audiences are economists, researchers in marketing, decision sciences, and psychology who deal with related issues, labelling practioners in both government and industry. The book is mainly based on two survey studies about risk perception, performed by the editors of the book. Next to the two editors, a number of consumer and marketing theorists have contributed to the book: Joel Huber, Jim Bettman, John Payne and Richard Staelin. Charles O’Connor, associated with a chemical company, is also one of the authors. One of the seven chapters of the book clearly differs from the rest: chapter 2 by Bettman, Staelin and Payne. This chapter is a longer version of an article by the same authors in the Journal of Public Policy. The chapter gives an in-depth overview of research on the effect
Book reuiews
153
of labelling hazard information on consumer behavior. Unlike the other chapters, it does not emphasize the rational economic Bayesian approach to risk perception, and it is not based on the two surveys mentioned before. Finally, it is the only chapter that is not co-authored by at least one of the editors of the book. Including the chapter may make the book more attractive to some potential readers. The remaining six chapters are all co-authored by Kip Viscusi. Wesley Magat co-authors five chapters. Noel Huber and Charles O’Connor coauthor respectively three chapters and one chapter. The book includes about 45 pages of appendices (over the 130 text pages) mainly devoted to the questionnaires used in the two studies. In chapter 1 information processing and individual decision making are introduced. A Bayesian approach to decision making under uncertainty is described. Central in the approach is the process in which individuals’ risk beliefs are updated when new information is added through labels. The basic assumption is that individuals follow a rational (Bayesian) belief updating process with some amount of error. Labels are compact, simple formats to convey extended, complex information. Labelling is used to reduce the cognitive effort and time to locate and process information, and thereby to increase the likelihood that relevant information is used (properly). In chapter 2 introduced before, presenting risk information through labelling is described from the perspective of consumer research and marketing. A labelling system for products containing toxic chemicals is described in more depth. Components that effective labels should have are distinguished. In chapter 3 the design of the consumer information study (one of the two surveys central in the book) is described. Four different labels for a cleaning agent product and three different labels for a drain opener product were used in the study. Some 368 consumers were interviewed in a shopping mall in a small town in the US. A number of different measurement procedures were used (conjoint measurement, contingent valuation and so on). In chapters 4 and 5 the analyses of the survey data are presented. Chapter 4 describes the effect of risk information on self-reports of precautionary behvior. In chapter 6 a survey of the effects of hazard warnings in the work place is described. Effects refer from altered beliefs to demands for higher wages. A total of 335 employees in the chemical industry were
154
Book reviews
surveyed. The study was partly reported earlier in the American Economic Review.
In chapter 7 the implications of the results of the two studies for ‘economic behavior’ are described. Largely this chapter repeats the partial conclusions of the previous chapters. The book deals with an important issue and is well written, I enjoyed reading it. The theoretical basis of the book is well established. Also, the consistent interdisciplinary and empirical approach is an attractive feature. The measurement procedures and statistical techniques are advanced and elegant (computer assisted interviewing, conjoint measurement and the like). The results of the measurements and analyses are described in a clear way without too much redundant technical details. These features will attract many academic economic psychologists in the fields of risk perception, belief formation and updating, and decision making in general. However, I did sometimes feel uncomfortable when reading the book. First, the premises of the book and the common thread running through it deserve attention. The editors, and in fact the ‘real’ authors, of the book set out to test whether belief updating takes place in a Bayesian way. So, it is tested whether the Bayesian model is correct or not. The authors do not seem to be interested in how risk perception and belief updating processes actually take place, but simply whether they do or do not take place in a certain (clearly favored) way. Because of this approach the literature on risk perception, belief formation, belief change, and learning in general is covered only partially. The authors do not formulate alternative theories (hypotheses) of belief updating, theories that might describe the data as well, more parsimoniously, or better than the rational Bayesian model does. The authors do not formulate explicit criteria for accepting or rejecting the Bayesian hypothesis. Readers may sometimes have the feeling that the authors attempt to persuade them, not by substantive arguments, but by simply repeating their conclusions. Before the actual results of the statistical analyses are presented, the reader is informed several times that the data ‘..are broadly consistent with a Bayesian framework..’ (p. 61). After presenting the results, the reader is informed again several times that ‘..individuals do respond to information policies in ways that are generally consistent with the Bayesian learning model’ (p. 125). Second, the policy implications of the studies in the book are not
Book reviews
155
quite obvious. The focus of the book is not on the optimal design of hazard information in general, or on the provision of hazard information on labels in particular, but on a test of a process model of the effect of hazard information. As a consequence, conclusions are mainly in terms of components and overall adequacy of the model instead of in terms of application and policy. Although policy makers are part of the group to which the book is targeted, the book may not meet their expectations. Finally, the analyses of the study (and the test of the model) are based on verbal self reports of values, perceptions and behavior. In the consumer study, data collection took place in a shopping mall. No mention is made of the validity of the measurement procedures. A contingent valuation procedure, e.g., may be subject to a number of biases (starting point bias, information bias, operational bias and so forth). Verbal self-reports of precautionary behavior can be subject to tendencies to report socially desirable, and to impression management. Explicitly asking people to value (extramarket) goods may lead to overestimation. As a consequence, some readers may doubt the internal and external validity of the two studies. Although such issues may be treated satisfactorily, they are not dealt with in depth in the book. Overall, my judgement of the book is quite positive. The authors have tackled an important and difficult issue in an innovative and elegant way. Academic economic psychologists who want to learn more about risk perception and its relation to decision making should read the book, but with some caution. Rik G.M. Pieters Dept. of Economics Erasmus University P. 0. Box I738 3000 DR Rotterdam The Netherlands
Book twxews
does not apply to the other chapters, the results on the attitudes towards income (in)equality itself are more interesting and convincing. As a conclusion we may say that Szirmai’s book reflects all the assets and liabilities that are normally associated with a doctoral dissertation. Inequality Observed is a research report for those who are active in (or wish to enter) the field of study under concern. It presents data, raises questions, gives few answers. To quote the author: ‘I have tried to present the data themselves in such a fashion that the reader can reach his own conclusions and can contrast his own interpretations with those presented here’. I personally found this very stimulating. Bert Overlaet Dept. of Psychology Catholic University of Leuven Tiensestraat 102 B-3000 Leuven Belgium
WK. Viscusi and W.A. Magat (eds.), Learning About Risk: Consumer and Worker Responses to Hazard Information. Harvard University Press, Cambridge, MA, 1987. pp. 130 + 45 append. $32.95. The goal of the book is stated to provide ‘ . . . empirical evidence on the impact of hazard warnings other than what can be extrapolated from case studies and from our general knowledge of human behavior’ (p. v). The target audiences are economists, researchers in marketing, decision sciences, and psychology who deal with related issues, labelling practioners in both government and industry. The book is mainly based on two survey studies about risk perception, performed by the editors of the book. Next to the two editors, a number of consumer and marketing theorists have contributed to the book: Joel Huber, Jim Bettman, John Payne and Richard Staelin. Charles O’Connor, associated with a chemical company, is also one of the authors. One of the seven chapters of the book clearly differs from the rest: chapter 2 by Bettman, Staelin and Payne. This chapter is a longer version of an article by the same authors in the Journal of Public Policy. The chapter gives an in-depth overview of research on the effect
Book reuiews
153
of labelling hazard information on consumer behavior. Unlike the other chapters, it does not emphasize the rational economic Bayesian approach to risk perception, and it is not based on the two surveys mentioned before. Finally, it is the only chapter that is not co-authored by at least one of the editors of the book. Including the chapter may make the book more attractive to some potential readers. The remaining six chapters are all co-authored by Kip Viscusi. Wesley Magat co-authors five chapters. Noel Huber and Charles O’Connor coauthor respectively three chapters and one chapter. The book includes about 45 pages of appendices (over the 130 text pages) mainly devoted to the questionnaires used in the two studies. In chapter 1 information processing and individual decision making are introduced. A Bayesian approach to decision making under uncertainty is described. Central in the approach is the process in which individuals’ risk beliefs are updated when new information is added through labels. The basic assumption is that individuals follow a rational (Bayesian) belief updating process with some amount of error. Labels are compact, simple formats to convey extended, complex information. Labelling is used to reduce the cognitive effort and time to locate and process information, and thereby to increase the likelihood that relevant information is used (properly). In chapter 2 introduced before, presenting risk information through labelling is described from the perspective of consumer research and marketing. A labelling system for products containing toxic chemicals is described in more depth. Components that effective labels should have are distinguished. In chapter 3 the design of the consumer information study (one of the two surveys central in the book) is described. Four different labels for a cleaning agent product and three different labels for a drain opener product were used in the study. Some 368 consumers were interviewed in a shopping mall in a small town in the US. A number of different measurement procedures were used (conjoint measurement, contingent valuation and so on). In chapters 4 and 5 the analyses of the survey data are presented. Chapter 4 describes the effect of risk information on self-reports of precautionary behvior. In chapter 6 a survey of the effects of hazard warnings in the work place is described. Effects refer from altered beliefs to demands for higher wages. A total of 335 employees in the chemical industry were
154
Book reviews
surveyed. The study was partly reported earlier in the American Economic Review.
In chapter 7 the implications of the results of the two studies for ‘economic behavior’ are described. Largely this chapter repeats the partial conclusions of the previous chapters. The book deals with an important issue and is well written, I enjoyed reading it. The theoretical basis of the book is well established. Also, the consistent interdisciplinary and empirical approach is an attractive feature. The measurement procedures and statistical techniques are advanced and elegant (computer assisted interviewing, conjoint measurement and the like). The results of the measurements and analyses are described in a clear way without too much redundant technical details. These features will attract many academic economic psychologists in the fields of risk perception, belief formation and updating, and decision making in general. However, I did sometimes feel uncomfortable when reading the book. First, the premises of the book and the common thread running through it deserve attention. The editors, and in fact the ‘real’ authors, of the book set out to test whether belief updating takes place in a Bayesian way. So, it is tested whether the Bayesian model is correct or not. The authors do not seem to be interested in how risk perception and belief updating processes actually take place, but simply whether they do or do not take place in a certain (clearly favored) way. Because of this approach the literature on risk perception, belief formation, belief change, and learning in general is covered only partially. The authors do not formulate alternative theories (hypotheses) of belief updating, theories that might describe the data as well, more parsimoniously, or better than the rational Bayesian model does. The authors do not formulate explicit criteria for accepting or rejecting the Bayesian hypothesis. Readers may sometimes have the feeling that the authors attempt to persuade them, not by substantive arguments, but by simply repeating their conclusions. Before the actual results of the statistical analyses are presented, the reader is informed several times that the data ‘..are broadly consistent with a Bayesian framework..’ (p. 61). After presenting the results, the reader is informed again several times that ‘..individuals do respond to information policies in ways that are generally consistent with the Bayesian learning model’ (p. 125). Second, the policy implications of the studies in the book are not
Book reviews
155
quite obvious. The focus of the book is not on the optimal design of hazard information in general, or on the provision of hazard information on labels in particular, but on a test of a process model of the effect of hazard information. As a consequence, conclusions are mainly in terms of components and overall adequacy of the model instead of in terms of application and policy. Although policy makers are part of the group to which the book is targeted, the book may not meet their expectations. Finally, the analyses of the study (and the test of the model) are based on verbal self reports of values, perceptions and behavior. In the consumer study, data collection took place in a shopping mall. No mention is made of the validity of the measurement procedures. A contingent valuation procedure, e.g., may be subject to a number of biases (starting point bias, information bias, operational bias and so forth). Verbal self-reports of precautionary behavior can be subject to tendencies to report socially desirable, and to impression management. Explicitly asking people to value (extramarket) goods may lead to overestimation. As a consequence, some readers may doubt the internal and external validity of the two studies. Although such issues may be treated satisfactorily, they are not dealt with in depth in the book. Overall, my judgement of the book is quite positive. The authors have tackled an important and difficult issue in an innovative and elegant way. Academic economic psychologists who want to learn more about risk perception and its relation to decision making should read the book, but with some caution. Rik G.M. Pieters Dept. of Economics Erasmus University P. 0. Box I738 3000 DR Rotterdam The Netherlands