Risk Management

When asked to put a monetary value on life, we are inclined to assert that life is priceless and that no amount of money can compensate for a life.  However, when life and death becomes impersonal and more statistical, looking at the big picture, monetary values can be put on life.  Life insurance companies, for example, thrive by doing just that.  They are able to use probability models to calculate expected payouts and assign premiums accordingly.  Feldman’s discussion of Broome’s paradox challenged these models, reminding me of what we have been talking about regarding game theory and the cold war.  Feldman brings up the example of building a tunnel that will socially benefit people living in the area.  However, the construction of the tunnel is bound to put some of the construction workers’ lives at risk.   The government evaluates this risk, and generates a figure representing the “life cost” of this project. They then take these figures to a contractor and work out a contract that compensates for these potential risks.  The government then proceeds with the project, asserting that this “life cost” is less than the overall social benefit that will be gained in completion of the project.  However, as Broome suggests, this model falls apart when we know ahead of time which workers will die in the process.  If these people who were expected to die were then asked to assess how much money it would take for them to compensate for certain death, this figure would become exceedingly high, perhaps infinite. In this case, the “life cost” will no doubt exceed the project’s net social benefit.  Applying this same concept to war, we run into similar problems.  War-related decisions are typically evaluated based on the big picture.  These decisions tend to ignore the value of individual lives, and instead look instead toward net social benefit.   Game theory works the same way.  When applying game theory, we are asked to find the best option overall, looking for a point of equilibrium. However, in either of these cases, the individual value of life tends to be underestimated.  If infinite value was given to each individual life, we likely would not see the number of casualties that we do. How might our lives have been changed if mathematic models did somehow incorporate the value of individual lives? 

Along those same lines, we are all aware of the existence of terrorism, but it is interesting to consider how much of what we know has already been filtered by risk analysts.  Fischoff explains how experts can choose to magnify risks in order to motivate citizens, or they can trivialize real risks in order to limit the worries of the citizens.  In this way, Fischoff also shows how the individual person is not necessarily considered in risk analysis.  Instead, risk analysts tend to look at the big picture.  Sure, only five people died from anthrax.  This is relatively insignificant considering the population of the United States far exceeds this figure.  However, to each of those five families, the threat of anthrax is not something that should be trivialized.  How much of what we know about terrorism today is either exaggerated or down played in these ways?  Is this a problem?  What, if anything, should be done about it? Is there any way to both mathematically evaluate risk and consider each person’s value individually?