Risk Equity: A New Proposal

This Article proposes a rigorous framework for analyzing the distributive impacts of risk regulation policies. This framework, which I term "probabilistic population profile analysis (PPPA)," is novel, yet firmly grounded in the social-welfare-function tradition in welfare economics. The PPPA framework conceptualizes the status quo and each possible policy as probability distributions across population profiles -- where each population profile is, in turn, a concatenation of lifetime health-longevity-income histories, one for each member of the population. A utility function transforms each such profile into a utility vector. An equity-regarding social welfare function is then specified. Policy analysts can employ the equity-regarding social welfare function both: (1) to determine how policies compare purely as a matter of equality; and (2) to determine how they compare all-things-considered, considering both equality and overall welfare. Part I of the Article criticizes existing approaches to risk equity that have been proposed in the scholarly literature: the environmental justice conception of risk equity; "individual risk" approaches; QALY-based equity analysis; incidence analysis; inclusive equality measurement; and cost-benefit analysis with distributive weights. Part II describes and defends PPPA. PPPA has many virtues. It recognizes that well-being is multidimensional, a function of both income and health/longevity; furnishes a metric for inequality; provides a basis for making tradeoffs between equality and overall well-being; and understands that distributive justice includes (but is not limited to) inequalities between high and low-status social groups.Regulatory Reform

Risk Equity: A New Proposal

What does distributive justice require of risk regulators? Various executive orders enjoin health and safety regulators to take account of “distributive impacts,” “equity,” or “environmental justice,” and many scholars endorse these requirements. But concrete methodologies for evaluating the equity effects of risk regulation policies remain undeveloped. The contrast with cost-benefit analysis--now a very well developed set of techniques --is stark. Equity analysis by governmental agencies that regulate health and safety risks, at least in the United States, lacks rigor and structure. This Article proposes a rigorous framework for risk-equity analysis, which I term “probabilistic population profile analysis” (PPPA). PPPA is both novel, yet firmly grounded in the social-welfare-function tradition in welfare economics. The PPPA framework conceptualizes both the status quo, and possible policies, as probability distributions across population profiles -- where each population profile is, in turn, a concatenation of lifetime health-longevity-income histories, one for each member of the population. A utility function transforms each such profile into a utility vector. An equity-regarding social welfare function (SWF) is then specified. Policy analysts can employ the equity-regarding SWF both (1) to determine how policies compare purely as a matter of equality; and (2) to determine how they compare all-things-considered, considering both equality and overall welfare. The proposal may seem utopian, but is not. Scholars in the field of optimal tax policy already use SWFs to evaluate policies. Characterizing policies as distributions across population health-longevity-income profiles builds on existing risk assessment and general-equilibrium-modeling techniques. Utility functions can be specified through survey research and, in the interim, by building on standard functional forms. Plausible normative axioms considerably narrow the possible forms of the SWF, and survey research or thought experiments narrow the field further. Part I of the Article describes and criticizes existing approaches to risk equity that have been proposed in the scholarly literature: the environmental justice conception of risk equity; “individual risk” approaches; QALY-based equity analysis; incidence analysis; inclusive equality measurement; and cost-benefit analysis with distributive weights. Part II describes and defends PPPA. PPPA has many virtues. It recognizes that well-being is multidimensional, a function of both income and health/longevity; furnishes a metric for inequality; provides a framework for making tradeoffs between equality and overall well-being; and understands that distributive justice includes (but is not limited to) inequalities between high and low-status social groups

A view of Estimation of Distribution Algorithms through the lens of Expectation-Maximization

We show that a large class of Estimation of Distribution Algorithms, including, but not limited to, Covariance Matrix Adaption, can be written as a Monte Carlo Expectation-Maximization algorithm, and as exact EM in the limit of infinite samples. Because EM sits on a rigorous statistical foundation and has been thoroughly analyzed, this connection provides a new coherent framework with which to reason about EDAs

Banking the unbanked: the Mzansi intervention in South Africa:

Purpose This paper aims to understand household’s latent behaviour decision making in accessing financial services. In this analysis we look at the determinants of the choice of the pre-entry Mzansi account by consumers in South Africa. Design/methodology/approach We use 102 variables, grouped in the following categories: basic literacy, understanding financial terms, targets for financial advice, desired financial education and financial perception. Employing a computationally efficient variable selection algorithm we study which variables can satisfactorily explain the choice of a Mzansi account. Findings The Mzansi intervention is appealing to individuals with basic but insufficient financial education. Aspirations seem to be very influential in revealing the choice of financial services and to this end Mzansi is perceived as a pre-entry account not meeting the aspirations of individuals aiming to climb up the financial services ladder. We find that Mzansi holders view the account mainly as a vehicle for receiving payments, but on the other hand are debt-averse and inclined to save. Hence although there is at present no concrete evidence that the Mzansi intervention increases access to finance via diversification (i.e. by recruiting customers into higher level accounts and services) our analysis shows that this is very likely to be the case. Originality/value The issue of demand side constraints on access to finance have been largely ignored in the theoretical and empirical literature. This paper undertakes some preliminary steps in addressing this gap

Using a scenario-neutral framework to avoid potential maladaptation to future flood risk

This study develops a coherent framework to detect those catchment types associated with ahigh risk of maladaptation to futureflood risk. Using the“scenario‐neutral”approach to impactassessment the sensitivity of Irish catchments tofluvialflooding is examined in the context of nationalclimate change allowances. A predefined sensitivity domain is used to quantifyflood responses to +2 °Cmean annual temperature with incremental changes in the seasonality and mean of the annual precipitationcycle. The magnitude of the 20‐yearflood is simulated at each increment using two rainfall‐runoff models(GR4J, NAM), then concatenated as response surfaces for 35 sample catchments. A typology of catchmentsensitivity is developed using clustering and discriminant analysis of physical attributes. The same attributesare used to classify 215 ungauged/data‐sparse catchments. To address possible redundancies, the exposure ofdifferent catchment types to projected climate is established using an objectively selected subset of theCoupled Model Intercomparison Project Phase 5 ensemble. Hydrological model uncertainty is shown tosignificantly influence sensitivity and have a greater effect than ensemble bias. A nationalflood riskallowance of 20%, considering all 215 catchments is shown to afford protection against ~48% to 98% of theuncertainty in the Coupled Model Intercomparison Project Phase 5 subset (Representative ConcentrationPathway 8.5; 2070–2099), irrespective of hydrological model and catchment type. However, results indicatethat assuming a standard national or regional allowance could lead to local over/under adaptation. Herein,catchments with relatively less storage are sensitive to seasonal amplification in the annual cycle ofprecipitation and warrant special attention