Society For Risk Analysis Annual Meeting 2017

Session Schedule & Abstracts

* Disclaimer: All presentations represent the views of the authors, and not the organizations that support their research. Please apply the standard disclaimer that any opinions, findings, and conclusions or recommendations in abstracts, posters, and presentations at the meeting are those of the authors and do not necessarily reflect the views of any other organization or agency. Meeting attendees and authors should be aware that this disclaimer is intended to apply to all abstracts contained in this document. Authors who wish to emphasize this disclaimer should do so in their presentation or poster. In an effort to make the abstracts as concise as possible and easy for meeting participants to read, the abstracts have been formatted such that they exclude references to papers, affiliations, and/or funding sources. Authors who wish to provide attendees with this information should do so in their presentation or poster.

Common abbreviations

Frontiers in Benefit-Cost and Risk Analysis

Room: Salon A   3:30 pm–5:00 pm

Chair(s): Sandra Hoffmann

Sponsored by Economics and Benefits Analysis Specialty Group and Society for Benefit-Cost Analysis

W4-A.1  3:30 pm  Individual and Social Discount Rates in Policy Analysis. Broughel J*; Mercatus Center at George Mason University and Antonin Scalia Law School

Abstract: Economists discount future benefit and cost flows for a variety of reasons, including time preference, diminishing marginal utility of consumption, opportunity cost of capital, and risk aversion. This paper argues that discounting approaches grounded in individual discounting behavior, such as time preference or diminishing marginal utility, are problematic when forming the basis for a social discount rate (SDR) used in benefit-cost analysis (BCA). A more useful discounting framework is one that is guided by the time value of money, where discounting is used as a way to compare potential investments to their most likely alternative investment. Such an approach ensures that the alternative that maximizes net benefits can be identified, and it avoids many of the thorny aggregation and ethics controversies that arise in discounting approaches grounded in individual behavior. An SDR of about 7 percent appears to be reasonable given recent data, which is consistent with current guidelines from the Office of Management and Budget. However, a modified shadow price of capital approach is also available for those analysts that wish to be guided by the time value of money whilst avoiding discounting altogether.

W4-A.3  4:10 pm  A New Method of Modeling and Simulating Hurricane Losses. Xian SY*, Lin N, Chavas D, Oppenheimer M; Princeton University; Princeton University; Purdue University; Princeton University

Abstract: US hurricane losses are induced by wind, storm surge flooding and precipitations. A statistical model is developed, associating the US landfall hurricane loss fraction (loss/exposure) to maximum wind, peak storm surge and maximum rainfall amount of landfall hurricanes. The economic exposure ($) is calculated from: (1) the reported affected counties; (2) the wind field modeling for each historical storm (using our latest wind field modeling method). Peak storm surge height and maximum wind speed explain a higher proportion of variance in loss fraction (54%) than maximum wind speed alone (44%). Adding maximum rainfall amount can increase explanatory variance to 64%. A random forest model can explain 88% of the variance. Storm arrival and hazards are modeled as respective stochastic processes. A normal copula is then used to simulate the hazards for each simulated storm. Applying simulated hazard parameters into the statistical models, we can simulate the loss fractions for the period of observation(1900-2014) and long-term (10,000 years). The simulation for the period (1900-2014) generates very close uncertainty range with the observed data. The simulation for a long-period (10,000 years) produces a return period that is close to that estimated using observed data. We propose a new modeling and simulation approach using all relevant hazards and allows an easy way to simulate hurricane losses under changing climate at a large-scale.

W4-A.4  4:30 pm  Produce Irrigated with Various Types of Nontraditional Water: Detecting Consumer Preferences through Cross-Regional Field Experiments. Ellis SF*, Kecinski M, Messer KD; University of Delaware

Abstract: In 2015, approximately 29% of the U.S. was experiencing some level of drought, conditions that are predicted to spread as climate change hastens shifts in the global water cycle. While using traditional sources of fresh water effectively is key to maintaining agricultural output, U.S. farmers are increasingly utilizing nontraditional sources, such as recycled wastewater. However, questions remain about how the public will perceive this practice. Will they look favorably on it, or will they have concerns, perhaps perceiving it as “polluted” or disgusting? This study uses field experiments, involving 600 adult participants, in the U.S. Mid-Atlantic (no drought), U.S. Southwest (drought), and Eilat, Israel (using nontraditional irrigation water for decades) to determine if consumer preferences vary by region (drought impact) and type of nontraditional irrigation water. To assess consumers’ willingness-to-pay (WTP), we presented them with “yes” or “no” options to purchase produce that was irrigated with different types of water (conventional, desalinated, recycled gray, recycled black, recycled produced). Participants earned $10, which they could either keep or use to purchase produce, and were randomly assigned to one of four information treatments—no information about recycled water, positive, negative, and both (randomized order). Results show significant effects with type of nontraditional irrigation water, region, and produce, but not with the information treatments. While participants prefer produce irrigated with conventional water over nontraditional, WTP is higher for produce irrigated with recycled gray (U.S.) and desalinated (Israel) over other types. In the U.S., those who had heard of gray water before participating in the experiment were more likely to purchase produce than others, while individuals who had heard of produced water were less likely. However, in Israel, previous knowledge about nontraditional irrigation water had no significant effect.

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