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    Murphy, Colleen Gardoni, Paolo and Harris, Charles E. 2011. Classification and Moral Evaluation of Uncertainties in Engineering Modeling. Science and Engineering Ethics, Vol. 17, Issue. 3, p. 553.


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ECONOMIC (IR)RATIONALITY IN RISK ANALYSIS

  • SVEN OVE HANSSON (a1)
  • DOI: http://dx.doi.org/10.1017/S0266267106000885
  • Published online: 11 July 2006
Abstract

Mainstream risk analysis deviates in at least two important respects from the rationality ideal of mainstream economics. First, expected utility maximization is not applied in a consistent way. It is applied to endodoxastic uncertainty, i.e. the uncertainty (or risk) expressed in a risk assessment, but in many cases not to metadoxastic uncertainty, i.e. uncertainty about which of several competing assessments is correct. Instead, a common approach to metadoxastic uncertainty is to only take the most plausible assessment into account. This will typically lead to risk-prone deviations from risk-neutrality. Secondly, risks and benefits for different persons are added to form a total value of risk. Such calculations are used to support the view that one should accept being exposed to a risk if it brings greater benefits for others. This is in stark contrast to modern Paretian welfare economics, that refrains from interindividual comparisons and does not require people to accept a disadvantage because it brings a larger advantage for others.

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Economics & Philosophy
  • ISSN: 0266-2671
  • EISSN: 1474-0028
  • URL: /core/journals/economics-and-philosophy
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