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Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.13/934295

Title
Homeland security: a case study in risk aversion for public decision-making
Author/Creator
Stewart, Mark G.;  Ellingwood, Bruce R.;  Mueller, John
Description
Governments and their regulatory agencies normally exhibit risk-neutral attitudes in their decision-making. However, for low probability-high consequence events many decision-makers tend to be risk-averse because of the catastrophic or dire nature of the hazard or event. The degree of risk averseness can be described by utility theory. This paper will infer utility functions that reflect the level of risk averseness of regulatory agencies when adopting new safety measures – such as investing $75 billion per year of the homeland security budget to avert terrorist attacks in the USA. The utility analysis considers threat probability, risk reduction caused by regulatory action, cost of regulatory action, and losses. The expected utilities using an identical risk-averse utility function for: 1) no enhanced security expenditure; 2) regulatory action associated with $75 billion of enhanced homeland security expenditure are compared and made equal to each other by modifying the risk-averse utility function. This means that both policy options are equally preferable so if the decision-maker is more risk-averse than suggested by the risk-averse utility function then regulatory action is preferable. It will be shown that the level of risk averseness needed to justify current expenditures for homeland security is considerable.
Relation
International Journal of Risk Assessment and Management Vol. 15, Issue 5/6, p. 367-386
Publisher Link
http://dx.doi.org/10.1504/IJRAM.2011.043690
Date
2011
Publisher
Interscience Publishers
Keyword(s)
terrorism;  risk aversion;  homeland security;  catastrophic events;  security expenditure
Resource Type
journal article
Identifier
http://hdl.handle.net/1959.13/934295
Identifier
ISSN:1466-8297
Language
eng
Reviewed
Reviewed
 
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Subject
"International Journal of Risk Assessment and Management"
 
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