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Section 101/102
EEP C101/ECON C125
March 28, 2011
GSI: Anna Spurlock
Today: Risk and Value of a Statistical Life
Risk Assessment Models:
Risk:
is the probability of a bad outcome: Risk=Prob(Bad Outcome)
Risk generating function:
is the relationship between risk and the process that causes it (i.e.
things that increase or decrease the probability of a bad outcome.
Bad Outcomes:
Human health (death/disease), environment (danger to species, etc.), food secu
rity (starvation).
Economics and Health Application:
Example: Pesticide contamination and harm
Risk
=
f
1
(
A
)
·
f
2
(
B
)
·
f
3
(
C
)
·
X
f
1
(
·
) =
Initial exposure on the farm
f
2
(
·
) =
Exposure to public
f
3
(
·
) =
Dose/Response
A
=
Damage control activity on site (application gear and technique)
B
=
Averting behavior of individuals (washing fruit at home before eating)
C
=
Medical control of pollution dosage (medication/treatment)
X
=
Quantity of pesticides applied
For a given unit of pesticide applied, the risk is:
Risk
=
f
1
(
A
)
·
f
2
(
B
)
·
f
3
(
C
)
1
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View Full Document Policy Scenario 1:
Suppose under current regulations and policies the distributions within the risk generating function
are as follows:
f
1
(
A
0
) =
0
.
5
prob
= 0
.
5
1
prob
= 0
.
5
f
2
(
B
) =
0
.
1
prob
= 0
.
5
0
.
2
prob
= 0
.
5
f
3
(
C
) =
0
.
1
prob
= 0
.
5
0
.
2
prob
= 0
.
5
Interpretation: taking
f
1
(
·
)
as an example. This says that there is a ﬁfty percent probability that
the pesticides applied on the plants will contaminate half the fruit and a ﬁfty percent probability
that it will contaminate all the fruit.
Risk
=
f
1
·
f
2
·
f
3
with probability
prob
(
f
1
(
A
0
) =
f
1
)
·
prob
(
f
2
(
B
) =
f
2
)
·
prob
(
f
3
(
C
) =
f
3
)
Possible risk outcomes given this risk generating function:
Risk
0
=
0
.
5
·
0
.
1
·
0
.
1 = 0
.
005
prob
= 0
.
5
·
0
.
5
·
0
.
5 = 0
.
125
0
.
5
·
0
.
2
·
0
.
1 = 0
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This note was uploaded on 06/06/2011 for the course ECON 125 taught by Professor Zilberman during the Spring '11 term at University of California, Berkeley.
 Spring '11
 ZILBERMAN
 Environmental Economics

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