Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
IES1001F - Environmental Decision Making, 2002 Resolving Conflicts and Making Tradeoffs and Cost-Benefit Analysis Resolving Conflicts - Making Tradeoffs Conflicts between achievement of objectives Conflicts between stakeholders Tradeoffs need to be made explicitly or implicitly to make a decision Various Techniques for evaluation of alternatives, e.g. Cost-benefit analysis Multiobjective weighting Ad hoc methods, etc. Many arrive at a total value for each alternative - choose alternative with the highest total value Utilitarian approach - find the alternative that gives “the greatest good for the greatest number”, i.e. Maximize “size of the economic pie” Cost-Benefit Analysis CBA based on “Utilitarianism” Maximization of Economic Efficiency - efficient use of resources CBA criterion: Maximize Net Benefits = Benefits - Costs To do this, need to: - identify types of costs and benefits - quantify the costs and benefits - place monetary value on these With time dimension: Criterion: Maximize Net Present Value 1 Net Present Value (NPV) for Aj = Example of Third London Airport STEPS: 1. Identify Types of Costs and Benefits 2. Estimate Values of Costs and Benefits a. first need to quantify amounts,e.g. how much travel time is saved, b. then place $ value on them. Financial (cash flow) vs. Economic Analyses Market Values vs. Economic Values - how much is an apple or muffin worth? Valuation: Can use market prices in some cases, but ... Need to Find “Shadow Prices” when either: - economic value = market price - no market exists Valuation Criteria: Opportunity Cost - the value of the resource in its best alternative use. For highway example: 2 Time Labour Agricultural Land Trees Willingness to Pay - how much people would be willing to pay for a “good or service” or to avoid it, or how much they would be willing to accept as compensation. For highway example: Time Labour Agricultural Land Trees Noise – observe differences in property values in noisy and in quiet areas 3. If time dimension, i.e. benefits and costs occur over time: a. Choose time horizon, T b. Choose discount rate for discounting of benefits and costs Use of discounting formula and factors $1 one year from now = 1.00/(1+r) = 0.9524 now if r = 5% r = social time rate of preference 4. Calculate NPV Use of discounting tables - handout Example 3 5. Choose alternative with highest NPV (or lowest Net Present Cost) Tutorial problems 4 Critique of / Issues with CBA: Advantages of CBA Disadvantages of CBA Third London airport: Buchanan Dissent What happened Other techniques to try to overcome CBA problems, e.g. - Cost-Effectiveness eg Lead Phase Down example - Multiobjective ranking and weighting methods e.g. Western Beaches Tunnel 5