Risk plays a role in any situation where decisions must be made based on uncertain information. In finance, for example, investors must often choose between putting their money in a bank account with a low but guaranteed interest rate, or in a stock that may yield high returns but also has a chance of losing all value. The amount of risk that the investors are willing to accept is called risk tolerance. Inversely, the amount of risk the investors are unwilling to accept is called risk aversion. Both considerations affect investors' decision-making.
There is much uncertainty in marine resource management. Managers must regularly make decisions without knowing exactly how the ecosystem, or stakeholders in some cases, will respond. As a result, there is risk. To make matters more complex, each group involved in marine resource management views risk in different ways, says Jake Rice, senior national advisor for ecosystem sciences with Canada's Department of Fisheries and Oceans. In particular, he says, conservationists, industry, and government managers all exhibit different types of risk aversion. And each type affects management in a different way.
MEAM spoke with Rice about the implications of risk aversion for EBM, and how the differences can be bridged:
MEAM: How do conservationists, industry (fishing or otherwise), and government view risk aversion differently?
Jake Rice: Risk aversion should be viewed relative to two very different types of management errors. One error is termed a "miss": when a conservation threat exists but management does not take action appropriate to address the threat. The other type of error is a "false alarm". This is when management acts to substantially restrict harvest (or otherwise reduce social or economic benefits) on the basis of perceived conservation needs, when in fact a lesser degree of restriction would have avoided serious ecological consequences just as effectively.
It is well documented in decision-theoretical research that, faced with uncertain information about threats and outcomes, error-free decisions are impossible. For a given degree of uncertainty, decision-makers have to make trade-offs between the two types of errors. One cannot lower the risk of one type of error without raising the risk of the other. Optimal trade-offs depend on the cost of a miss compared to the cost of a false alarm.
This is a useful framework for addressing these questions. The risk aversion of the various communities - conservation, industry, government - can be explained in terms of their views on the relative costs of the errors inherent in decision-making. First, it is important to note that all communities want low error rates. Beyond that, in my view the evidence indicates that:
- The conservation biology community is very risk averse to misses. They consider a miss to have very high cost (on the ecological dimension) and are willing to accept a high false alarm rate if needed to have a low probability of any misses;
- The fishing industry, not surprisingly, considers false alarms to have high costs on social and economic dimensions, and look for a balance between the two types of error or a small bias toward avoiding false alarms; and
- Subjectively, it appears that politicians are particularly risk averse relative to false alarms on the social dimension of sustainability (making decisions that cause unnecessary social hardship, even if temporary), although I have not seen that documented experimentally.
MEAM: How do those differences in risk aversion impact management?
Rice: The difference in risk tolerances for misses and false alarms are rarely understood by participants in inclusive decision-making processes - or when lobbying top-down decision-making processes. When the different communities apply different weights to the costs on the three dimensions of sustainability, no amount of dialogue will find a compromise that seems equally fair from all perspectives. The result is polarization of viewpoints and inability of inclusive processes to find consensus solutions. It also reduces the ability of processes to learn from experience, because the experiences (namely, what errors really did or did not occur) are felt and interpreted on different grounds.
MEAM: Are there ways for managers to bridge those differences?
Rice: First of all, better knowledge of the ecological, social, and economic aspects of a fishery always helps - to the extent that better knowledge reduces uncertainty and makes the likelihood of either type of error lower. Beyond that, differences can be bridged only by reducing unconstructive dialogues that are likely between the conservationist community and fishers, each failing to acknowledge that the risk aversion profile of the other is a legitimate starting point for seeking a mutually acceptable decision.
There are constructive discussions that could occur regarding the costs of misses and false alarms on each dimension of sustainability (ecological, social, and economic). Were it possible to find common ground on the individual costs, it might be possible to have a more constructive dialogue about which trade-offs have a fair balance of costs. It would also ensure that the "transition costs" of inflicting short-term social and economic constraints for short-term ecological benefits leading to longer-term social and economic opportunities are part of the dialogue from the outset - rather than something done at a late stage in the overall decision-making process.
I am not sure this framework for applying risk aversion will solve all problems or allow the various communities always to interact harmoniously. However, it is practical and will not make things worse. If it helps at all, every perspective - and the ecosystems and the industry - will gain.
For more information:
Jake Rice, Department of Fisheries and Oceans, Ottawa, Canada. E-mail: ricej [at] dfo-mpo.gc.ca