1.) In the featured article “The Precautionary Principle as a Basis for Decision Making”, the author, Cass R. Sunstein provides his view on the practicality of the Precautionary Principle and the impact it could have on major policies across the world. The basic underlying principle of the Precautionary principle is that “it is better to be safe than sorry”. The principle can be adopted in many scenarios and it different aspects. An example of the strong application of the precautionary principle was at the Wingspread Declaration at 1998, which advocates the use of precautionary measures even before the cause and effect relationship is examined. The European Union has openly endorsed the principle as a basis for decision making but is yet not clear on how it would be applied to specific scenarios. The Author suggests an examination of the principle’s strengths and weakness as it has potential application in critical areas such as climate change, nuclear power and even war.
Even the basic interpretation of the principle raises difficult queries. Without assigning costs to safety, one cannot quantify on how much safety is required while applying the principle. Another issue with the strong application of the principle is that it completely tries to eliminate risk without realizing that eliminating or reducing risks at one end will definitely impact and increase the risk at the other end. There exists risk in every scenario as we live in a world which is scarce in resources making it logically inconsistent.
The author has examined couple of examples to check on the relevance of the precautionary principle. The first example was Genetic modification of food, which creates fear due to health and environmental concerns, but at the same time fail to see strides in this field could also improve human health. Similarly, the author examines other scenarios such as fear of Nuclear power, where in fact it could actually help cut down emissions from fossil fuels and levels of Arsenic in drinking water, which when revised to a higher standard would make it highly expensive with very little impact. Using the above example, the author questions the purpose of the principle and its capability in decision making. Other examples why the author dismisses the principle is the Federal courts dismissal over the Environmental Protection Agency’s claim to ban Asbestos, since the substitutes recommended have known effects to induce cancer and the Drug Approval process, in which the author suggests to create a drug approval process which would compare the costs of iatrogenic illness with the benefits of available medication for preventable deaths.
The author claims that there is an association between mortality and regulatory expenditures, which could help while developing regulations as we have to deal with scarce resources. The Precautionary Principle itself could prove to be paralyzing as it can stand a hurdle during regulation and non-regulation.
There is a biased use of the Precautionary Principle, where in risks which could be significant could be traded off with those which would be eye-catching and for their personal benefit. The principle does not provide guidance for regulation and leaves many questions unanswered like the trade-offs between present and future risks.
Author endorses the use of the Cost-Benefit Analysis instead of the precautionary principle, which would help quantify benefits and costs before making a decision. Decision makers should not excuse themselves from using this mode of analysis even when it is hard to quantify costs and benefits in certain situations.
The author also dismisses the notion about living in a risk-free environment. If we try to eliminate one risk, for example terrorism through air travel, the cost of doing this would far outweigh the benefits of preventing terrorist attacks. Precautionary principle can be more of a nuisance and increase the problem instead of tackling it down. Cost-Benefit Analysis might not provide all the answers but it can provide as a foundation towards decision making, making it a better alternative for decision-makers rather than adopting Precautionary Principle.

2.) There are various literature available about the precautionary principles, with a lot of papers especially dedicated to environmental policy, especially after the Rio Declaration and the Intergovernmental Agreement on the environment (IGAE). According to various reports, adoption of the precautionary principle and its impact on the environmental policy and law in Australia was welcomed, provided proper implementation of it is carried out (Gullet, 2000) (Hardin and Fisher, 1993). There are even studies identifying the clear gaps between scientific data for creating policies and political decision making, but efforts must be made to reduce uncertainty as much as possible (Kriebel, 2001).
Despite its widespread support, there are articles apart from the one assigned which does not find value in the precautionary principle because of the common misconceptions swaying public opinion that economic growth and innovation tends to directly threaten environment and public health, while also being ignorant of the advantages innovation can bring forth. Another issue with the precautionary principle is lack of weighing the risks of stagnation with the risk of change (Adler, 2011). Another report suggests that incomplete information can lead to risky decision making (Perry, 2013). Another study states all the costs in relation to the issue must be completely taken into consideration (Wexler, 2005). Disputes have also surfaced resulting from the adoption of the precautionary principle, shrouded in terms of trade protectionism such as ban of American and Canadian beef due to injection of growth hormones and also the sale of genetically modified crops to Europe (R. Foster, Vecchia and H. Repacholi, 2000).
My understanding of the Precautionary Principle is that if a particular product or process is believed to unsafe, then the product or treatment should not be introduced to the market until all the risks pertaining to the product are ascertained and that there are mechanisms in place to control those risk, if not eliminate. In short, it a macro application of common sense which we use on a daily basis but on policies in regards to a particular product or process in which it’s safety is in question. Precautionary Principle has been widely adopted in areas with environmental repercussions and those of scientific uncertainty.
The underlying principle, which is “Better to be safe than sorry”, although simple can give rise to complexities depending on which product, process or issue that is in question. This is a principle which has a lot of scope and ground to cover, there are obviously many elements and issues of the principle that needs to addressed: * What is the required safety standard? * When risk is minimized in one aspect, it does not get eliminated but transferred. What is the protocol in dealing with this? * Innovation is the cornerstone of our civilization, how do we find a way to allow cautious approach towards innovation. Is Cost-Benefit Analysis the only alternate tool we need to address this? * Fear and speculation about risks and uncertainty is the reason for the adoption of the precautionary principle. Where do we draw the line between the emotional element and cost-benefit aspect?
Currently, as we stand the losses from adopting the precautionary principle has been recorded, but, the gains of which cannot be quantified yet, due to the long term nature of its goals. Until we provide answers to the questions raised above, the precautionary principle would still be irrelevant as it would not be able to enhance protection against whatever is in question.

3.) Precautionary principle has been adopted in the sphere of U.S. Food, Drug and Ecological enactments, but they are not exclusively declared as being adopted as “Precautionary Principles” per se, providing various regulatory authorities with powers to prevent foreseeable yet unproven dangers. The two sectors we will examine to prove this would be the Pharmaceutical and Energy Industry.

* Pharmaceutical Sector:

One of most harmful implications on the pharmaceutical industry due to application of the precautionary principle is “Drug Lag”. Drug Lag refers to the delay in the approval of drugs and treatments which are potentially lifesaving. In the United States, the Food and Drug Administration (FDA) ensures that only drugs that are “effective and safe” are approved by them are available on the shelves for consumers. The impacts of this could be devastating as the number of people waiting and eventually dying from the denial of medication or treatment from the possible life saving drugs and treatment could be significant (Kazman, 1990).

A classic case to support the above would be surrounding the drug “Misoprostol”, a drug to help prevent gastric ulcers. Misoprostol was developed around the early 1980’s and other countries approved this drug by 1985. The FDA only approved this drug at 1988 after a stringent drug review by the FDA which took place for around nine and a half months, during which 8,000 to 15,000 lives could have been saved. Therefore, the precautionary approach adopted by the FDA was an obstacle to the objectives on why it was created on to help protect the public health of its consumers (Kazman, 1990).

An alternative would be through a Cost Benefit Analysis needs to be done with Branded and Generic drugs instead of withholding the drug or treatment which would save lot of lives due to the drug lag.

* Energy Sector:
Economic growth of a country is heavily-reliant on the infrastructure it can provide. The energy sector is one such important sector, but one which can have adverse effects on the economy if regulations surrounding its freedom are high. Regulatory attempts have been made on energy sectors such as the Nuclear power sector. Adopting a modest approach of precautionary principle can increase variable costs. (Falaschetti, 2013)
Adopting a precautionary principle towards Nuclear energy with the aim of protecting environment can have adverse effect to the environment itself. The longer the review it takes, the more damage its alternatives will do. The non-renewable alternatives could cause more damage to the environment in terms of pollution and its availability. Before more fossil fuels get burnt for consumption, a better approach is required to utilize the true extent of nuclear power, even if it has to be moderately regulated.
An alternative would be a thorough Cost-Benefit Analysis needs to be done between Nuclear energy and fossil fuels before such unwanted regulations gets slapped on, which would just cause more pollution and loss of non-renewable resources while ignoring the higher outputs that could be achieved through Nuclear Energy.

4.) A Perfect competition exists when the following conditions are met: * Firms sell identical products, * Entry to the market is free of restrictions, * There exists no advantage of established firms over new ones, * Both Buyers and Sellers are well informed about the prices.
The principle of perfect competition arises if the minimum efficient scale of a single producer is small relative to the market demand for goods or services, in other words there exists no monopoly (ECONOMICS AND BUSINESS STATISTICS, 2013). A firm in a perfect competition are called as price takers. This is due to the fact that these firms do not influence market prices as their productions is trivial compared to that of the total market. In other words, a firm in this scenario is the price taker, while the industry is the price maker.

Free entry of firms along with the fact they can exist in the long run, ensure profits are normal. Additionally, due to the presence of homogenous producers, the demand curve becomes perfectly elastic.

One of the key features of Perfect competition is Free Entry, which in other words means no regulation. This goes against the underlying interpretation of the precautionary principle, which is that “it is better to be safe than sorry’. In a perfect competition environment, competition is low due to homogenous products and price. The scope of regulation is low in this scenario, as one of the key objectives of a regulation is to ensure that monopoly is controlled and does not exist, Perfect competition is a scenario which has already achieved that. Further regulations by adopting the precautionary principle would mutate the fabric of what it means to be in a perfect competition and seems completely unnecessary. Additionally, the precautionary principle is illogically inconsistent and biased which does not bode well with the conditions set forth in a perfection competition.

The procedure of applying the safety precautionary principle must be thoroughly analysed and unbiased and must incorporate possibly influenced parties. A thorough Cost-Benefit Analysis would be required with an eye for finding whether the benefits outweighs the cost.

The state of perfect competition is a hypothetical one, but there are products which have similar features of a perfect competition. A classic example would be that of Salt, there are lot of producers of salt and an ever growing market for it as well. Even, if you do compare between branded and generic salt products you would find less difference reflecting homogenous characteristics. Adopting precautionary principle seems unreasonable as it would destroy the reason for its purpose. Instead of protecting the market, it would shatter it’s dynamics due to a rigid approach and arrest free movement of firms and its products in the market.

Precautionary principle and perfect competition will fail to complement each other, as it is a completely irrelevant concept during perfect competition.

5.) The Global Financial Crisis which occurred between 2007 and 2008 was one of the biggest financial crises to have occurred after the Great Depressions. It was majorly caused by the loss in the confidence by investors with the sub-prime mortgages which further lead to collapse of some of US’s most prominent financial institutions like Lehman brothers. This lead to a liquidity crisis, the effects of which was experienced all the over the world, making lending worldwide difficult. In the wake of its devastating effects, there was no consensus on the causes of the 2007 – 2008 financial crisis, as was the cause during the aftermath of the Great Depression of the 1930’s. Fortunately and eventually, there were questions raised about the effectiveness of the existing regulation of the financial systems across the globe. Countries all around the globe knew they could not tackle this issue through domestic policy, which lead to the discussions across various forums and international organizations like the IMF and WTO prompting structural changes and review of their responsibilities. The G20 summit at 2010 helped provide prominent factors which contributed to the Global Financial Crisis, such as inadequate governance and accountability within a financial institution, Uncontrolled liquidity creation and construction of complex financial instruments to name a few(Davis, 2011).

Based on the factors identified various regulatory reforms were made at national and international level governing various financial fields such as banking, insurance and other related institutions in the securities and finance sector with emphasis on organisational structure, governance, remuneration, risk management practices and techniques, accounting reforms, credit rating agencies and Bank capital requirements, liquidity, funds management, consumer protection and reporting. Various international assessments such as the Financial Sector Assessment Program (FSAP) and Financial System Stability Assessment (FSSA) were introduced by the IMF and World Bank.

From the above, we can conclude that economies with poor regulations during the early 2000 inclined to perform worse during the GFC (Imf.org, 2012). If anything the Global Financial Crisis shows that there exists “uncertainty” in the financial markets. Currently, there are no current economic methods which can assist us in ascertaining uncertainty and maintaining a long term view towards a properly regulated financial system is essential for protecting the global economy.

Interestingly, International financial crisis have interestingly occurred randomly at ten year intervals since the 18th Century (Ju, 2012).Critics could argue that fear along with high levels of speculation could be a big motive for not adopting Precautionary Principle, but knowing the history and cyclical nature of international financial crashes, it seems reasonable to take a precautionary step and ensuring highly complex and unpredictable practices are either removed or regulated to ensure the world would be in a better state to deal with another similar catastrophe. This will depend on how quickly we adopt precautionary principle towards regulation of financial markets and the political commitment of various economies both on a national and international level.

REFERENCES:

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