CHICAGO -- As a technology entrepreneur, you know reality up close and personal. No matter how elegant your theories about the value of your technology, the strength of your business model, or the accuracy of your financial forecast, if you're wrong you'll find out quickly and painfully.

Many other people spend much of their lives in non-real worlds of theory, ideas, speculation, and faith. These worlds have their importance, but sometimes they clash with reality, and sometimes tech entrepreneurs are caught in the crossfire.

For a currently pressing example, take the debate about regulation of nanotechnologies. Because nanotech operates at the molecular level, there has been much speculation about new, unknown risks of nano products and processes. Indeed, it now appears that the debate is no longer whether nano will be regulated, but only about its form and degree.

To help ensure that the debate is open, fair, and fact-based, nanotech entrepreneurs urgently need to understand how to think about risks and regulation. Amidst all the rhetoric, you are likely to hear two fundamentally different approaches to regulating technology risks. ¹

One approach seeks to anticipate and prevent any harm, which sounds like a reasonable goal and certainly carries a strong emotional message. But for this approach to be effective, one must know many specific things about all imaginable adverse impacts, which means wrestling with endless speculative risks. Especially for something as new as nanotech, this is likely to be so costly and complicated that it can effectively preclude pursuing certain nano products and processes.

The other approach to risk regulation tries to fashion highly specific solutions to problems that actually occur or have a high probability of occurring. Rather than being speculative, this approach is empirical, relying on constantly accumulating experience in dealing with actual adverse consequences. This approach is the one that the U.S. and other successful societies have historically adopted.

An encouraging development for a fact-based approach is that regulation has been shown to often hurt more than it helps. Led by economists skilled in empirical analysis, a body of intellectual capital has been created that demands answers to tough questions about risk and regulation, such as:

• How should we think about the trade-offs between risks and rewards of regulation, especially at the margins of public safety vs. public benefit?
• How can we improve consideration of harmful, unintended consequences that invariably accompany government attempts to regulate risk?
• What is the impact of both obvious and hidden incentives in generating and controlling risk?
• What would be the impact of much stronger punishments for violating certain regulations?
• How can we improve consideration of the entire chain of events, not just first order effects, set in motion by government attempts to regulate risk?

But, unfortunately, these questions are not so commonplace as to ensure that they are being asked, much less that any proffered answers are accurate. That's why it's essential that economists skilled in these matters are involved in devising regulatory solutions.

Yet, economists rarely participate in the public forums about nanotech risk and regulation. For example, consider the work of the Chicago-based Center on Nanotech and Society (CNS), which was founded last year to explore the risks and ethics of nanotechnology. To lead this exploration, CNS invites eminent people to its boards and conferences. CNS presumably believes these folks are presenting, over time, all that's essential to understand and intelligently address nanotech risks and ethics.

Indeed, a press release for a recent CNS co-sponsored conference boasted, In order to ensure an appropriate mix of voices, the co-organizers have invited a variety of participants, including scientists, engineers, journalists, humanists, and civil society representatives. And at CNS's latest conference, one panelist stressed the need for a broad interdisciplinary approach to nano R&D, which includes all stakeholders and all specialties, including science, law, business and industry, and the social sciences.

Except economists, who are notable by their absolute absence from all of CNS’s boards and conferences.² To be charitable, maybe this absence is because economics has long been known as the “dismal science”, and it’s feared that economists might dampen the energy of CNS explorations.

But, that term was coined to ridicule Thomas Malthus' famously wrong 19th century speculation that exploding population growth would drive a worldwide famine. Today, Malthus intellectual heirs have moved from the economics group to populate the so-called public advocacy groups who espy a speculative disastrous cloud around every silver technology lining. It's no surprise then, that representatives of these groups are regularly invited to speak at nanotech forums. Yet, it's important that the debate include a rational, empirical economic approach, as well.

Technology Review magazine recently highlighted two nanotech breakthroughs that promise effective new approaches in treating medical conditions that have been the scourge of mankind for millennia. But if the debate about nanotech risk is not open, fair and fact-based, these technologies may not see the light of day for several more millennia.