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View Diary: Cost-Benefit Analysis (50 comments)

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  •  An easier example: Drilling for oil in the Gulf of (3+ / 0-)

    Mexico. What is the cost of the BP oil spill? How do you measure the cost of subtle contamination of the fishery? Of the loss of thousands of turtles, dolphins, birds?
       There is obvious measurable cost - the damage to the fishing and tourist industry. Now factor in the expected loss - IOW, the probability that this will happen again.
       It's inevitable that the downside risk is underestimated.
       In the case of climate change, there is a non-trivial probability that civilization will collapse. How do you price that?

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