cba5 - Engineering Risk Benefit Analysis 1.155, 2.943,...

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CBA 5. Evaluating Public Activities 1 Engineering Risk Benefit Analysis 1.155, 2.943, 3.577, 6.938, 10.816, 13.621, 16.862, 22.82, ESD.72 CBA 5. Evaluating Public Activities George E. Apostolakis Massachusetts Institute of Technology Spring 2007
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CBA 5. Evaluating Public Activities 2 General Welfare The selection of public projects is not made on the basis of profit, but, rather, on the basis of maximization of the general (or, social) welfare of the citizens . What is general welfare? Pareto Improvement: At least one person is made better off by the project and no one is made worse off. Potential Pareto Improvement: Those who are better off could compensate those who are worse off and still be better off. This means that the aggregate benefits are bigger than the aggregate costs. No actual compensations need to occur.
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CBA 5. Evaluating Public Activities 3 Evaluating Public Activities If all costs (“disbenefits”) and benefits can be expressed in terms of money, then a decision criterion such as the Net Present Value (Present Worth) could be used. Discounting of cost and benefit flows should be applied, as appropriate. Ethical issues may arise. Can the value of a park be measured in monetary terms?
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CBA 5. Evaluating Public Activities 4 Distributional Inequity The risks and benefits do not usually accrue to the same individuals or to the same generation. Taxation is one way to remedy inequities. Ethical issues may arise. Can the impact of a project on future generations (e.g., waste disposal, climate change) be measured in monetary terms? Executive Order 12898 on Environmental Justice : No policy will result in disproportionately high adverse human health and environmental effects on low-income and minority populations compared to the general population in affected communities.
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CBA 5. Evaluating Public Activities 5 Public Activities: Ethical Issues (1) How should risk transfer between generations be handled? How much should we spend now to protect future
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This note was uploaded on 11/08/2011 for the course AERO 16.851 taught by Professor Ldavidmiller during the Fall '03 term at MIT.

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cba5 - Engineering Risk Benefit Analysis 1.155, 2.943,...

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