Zero-risk bias

Zero-risk occurs when individuals value complete elimination of a risk, however small, to a risk decrease that is proportionally larger, but does not get rid of the risk entirely. Individuals may prefer small benefits that are certain to large ones that are uncertain.

One example of this relates to the Superfund, which instructs the EPA in hazardous waste cleanup. Instead of a standard of "reasonable risk," the law calls for "zero risk," which leads to complete cleanup of waste sites. What results is that greater total reduction in risk is sacrificed for total elimination at one site. This means that while some sites are at zero-risk, many others are still at dangerous, toxic levels (compared with a strategy of reducing risk to a reasonably safe level at many if not all sites).

Another example is the Delaney Clause of the Food and Drug Act of 1958, which stipulated a total ban on synthetic carcinogenic food additives. The "total ban" was a zero-risk policy that actually led to health risks due to exposure to older, probably more dangerous food additives that continued to be used. Also, it gave companies incentive to create non-carcinogenic additives that were potentially more harmful.

Zero-risk occurs because individuals worry about risk, and eliminating it entirely means that there is no chance of harm being caused. What is economically efficient and possibly more relevant, however, is not bringing risk from 1% to 0%, but from 50% to 5% (for example).

It is related to the certainty effect, and it can also be explained in terms of a tendency to think in terms of proportions rather than differences. When a risk is reduced to zero, 100% of the risk is removed.