Chapter | New Perspectives on Regulation | 2009

Government as Risk Manager

by Tom Baker and David Moss

Abstract

We explain the four basic ways to manage risk: prevention, risk shifting, risk spreading, and loss control. We set out five principles of effective government risk management gleaned from extensive historical study: (1) link responsibility and control, (2) manage moral hazard, (3) pool risk in sound institutions, (4) adopt market conforming approaches to the extent possible, and (5) structure markets to promote safe products. Finally, we describe some promising new government risk management ideas that incorporate these principles.

Keywords: Government and Politics; Risk Management; Risk and Uncertainty; Safety;

Citation:

Baker, Tom, and David Moss. "Government as Risk Manager." Chap. 4 in New Perspectives on Regulation, edited by David Moss and John Cisternino, 87–109. Cambridge, MA: Tobin Project, 2009.