Opening up the Black Box: Technological Transparency and Prevention

Abstract

We discuss the behavioral and welfare implications of uncovering the causal mechanism of prevention. We introduce the concept of technological transparency (TT) - the extent to which scientific knowledge reveals the mechanism of prevention. While TT improves welfare through more efficient preventive efforts, this improvement may be undermined or reversed if information is incompletely disclosed or if the risk is insurable. TT affects behavior through an ex-ante information channel and an ex-post regret channel. Our findings inform the cost-benefit analysis of advancing the knowledge about risk determinants, the effective disclosure of such knowledge, and the design of information campaigns to promote public safety.