6.1 Managing Risks: Cost-Benefit Analysis
As already mentioned in other presentations, new technologies which we are developing should respect the values which we hold dear. One of these key values is safety.
However, safety not only implies benefit but also costs. So we have to make a proper economic evaluation of the safety aspects related to the new technologies that we develop, in other words, a cost-benefit analysis (CBA). Broadly, CBA has two purposes:
- To determine if it is a sound investment/decision (justification/feasibility).
- To provide a basis for comparing projects. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.
But, conducting a CBA is not easy! What are the precise costs and benefits? For example, how can one express in a number the value of a human life or a better environment? Or to put it more philosophically: how to price the priceless?
Other than this, CBA also asks how likely it is that an accident will happen? And when: in the short term or in the long term? What are potential scenarios and what are the (unknown) unknowns? These are questions for which the answers are not readymade.
Despite these difficulties, CBA is a widely used and a very practical tool to produce greater (but not full!) objectivity and transparency. But you have to be aware of the flaws! In the next web lecture, Prof. Genserik Reiniers will explain how to conduct a CBA from the perspective of safety and the issues to be taken into consideration.
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Based on a work at https://ocw.tudelft.nl/courses/responsible-innovation/.