PPE 10:31

PPE 10:31 - Risk - Numbers matter Regulation all...

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Risk - Numbers matter - Regulation – all governments try to regulate risk in some way - Cost per life year saved – saving life of a child is worth more than saving the life of an old person (since there are more years remaining) o Mandatory seat-belt law only costs $69 per life year saved o Insurance costs are near 100,000 per life year saved in the US Breaking the vicious circle – we have some regulations in government (e.g. regulation of nuclear power plants), they are so inefficient and so expensive that the cost of life year saved is ridiculously high - Meanwhile, cost effective regulations (e.g. clean water regulations) are not in effect when they should be o Figure out how much we want to spend on a life year, and pass all the regulations up until that point – and then stop. People do many contradicting things for risk aversion Whether something is observable or has a delayed effect tended to fall in the same category – there was a correlation - Factor analysis tried to reduce these correlations to something sensible o The reason things correlate is because they share the same psychological factor – the trick is to recovering what exactly these psychological factors are The right, left factor is catastrophic - nuclear weapons used in war, nerve gas accidents o for known risks: vaccines, trampolines, auto accident o Risks in top right corner are heavily regulated (risks that are unknown and catastrophic) - the up, down factor is unknown – I don’t know what the probability is?!?!? Intuitions about risk - catastrophic – seems uncontrollable o How much do people worry about risk on a public level - unknown - involuntary - larger proportions - individuals - unnatural - commission (vs. omission) - zero risk - negative correlation of benefit and risk o Belief overkill – people will hold contradiciting bliefs over some policy
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This note was uploaded on 01/14/2012 for the course PPE 253 taught by Professor Mellers during the Fall '11 term at UPenn.

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PPE 10:31 - Risk - Numbers matter Regulation all...

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