ENVIRONMENTAL PROBLEMS ARE HUMAN COLLECTIVE ACTION PROBLEMS. GOVERNMENTS SHOULD SOLVE COLLECTIVE ACTION PROBLEMS SIMPLY TO FURTHER THE SATISFACTION OF HUMAN PREFERENCES.

RISK-BENEFIT ANALYSIS: Comparison of alternatives based on calculation of expected risks and benefits [p. 188]. We will also refer to this sort of analysis as LOSS-BENEFIT ANALYSIS.

COST-BENEFIT ANALYSIS: Risk-Benefit Analysis in which the risks and benefits can be expressed in monetary terms [p. 188].

CHOICE WITH CERTAINTY: The benefits and losses of the the alternative choices are known with certainty.

CHOICE UNDER (DETERMINATE) RISK: The possible benefits and losses of the alternative choices can be assigned definite known probabilities.

CHOICE UNDER UNCERTAINTY (INDETERMINATE RISK): The possible benefits and losses cannot be known with certainty, and the probability of the possible benefits and losses cannot be known with certainty.

ALTERNATIVE #1: PAY $10 MILLION TO PRESERVE THE HABITAT OF A SPECIES, WHERE IT IS ASSUMED THAT THE SPECIES WILL DEFINITELY NOT BECOME EXTINCT IF THE HABITAT IS PRESERVED.

ALTERNATIVE #2: SAVE $10 MILLION BY NOT PRESERVING THE HABITAT, IN WHICH CASE, IT IS ASSUMED, THAT THE SPECIES WILL DEFINITELY BECOME EXTINCT.

LOSS-BENEFIT CALCULATION FOR ALTERNATIVE #1: Benefits = 1 Species Preserved; Loss = $10 Million.

LOSS-BENEFIT CALCULATION FOR ALTERNATIVE #2: Benefits = $10 million saved; Loss = 1 Species Extinct.

ALTERNATIVE #1: PAY $10 MILLION DOLLARS FOR HABITAT THAT WOULD DEFINITELY PRESERVE ONE SPECIES FROM EXTINCTION, BUT THERE IS A 1/1,000,000 CHANCE THAT 1,000,000 OTHER SPECIES WILL BECOME EXTINCT. (E.O. Wilson estimates that there are probably 14 million species of living things on earth, mostly insects.)

ALTERNATIVE #2: PAY $10 MILLION DOLLARS TO ELIMINATE THE 1/1,000,000 CHANCE THAT 1,000,000 SPECIES WILL BECOME EXTINCT, BUT THEN IT IS CERTAIN THAT ONE OTHER SPECIES WILL BECOME EXTINCT.

ALTERNATIVE #3: NEITHER #1 NOR #2. SAVE $10 MILLION DOLLARS; IT IS CERTAIN THAT ONE SPECIES WILL BECOME EXTINCT; THERE IS A 1/1,000,000 CHANCE THAT 1,000,000 OTHER SPECIES WILL BECOME EXTINCT.

Loss-Benefit Analysis In Choices Involving Known Risk Or Uncertainty Requires Calculation Of Expected Benefits/Losses: This Is A Weighted Average Of The Magnitude Of Each Benefit/Loss Multiplied By Its Probability.

EXPECTED LOSS-BENEFIT CALCULATION FOR ALTERNATIVE #1:

EXPECTED BENEFIT = One Species Preserved (One Species Will Definitely Be Preserved;

EXPECTED LOSS = One Species (On Average) Lost (Probability Of 1/1,000,000 x 1,000,000 Species Potentially Lost) And $10 Million Dollars (Definitely Lost).

EXPECTED LOSS-BENEFIT CALCULATION FOR ALTERNATIVE #2:

EXPECTED BENEFIT = One Species (On Average) Preserved (Probability Of 1/1,000,000 x 1,000,000 Species Potentially Saved);

EXPECTED (AVERAGE) LOSS: One Species (One Species Will Definitely Be Lost) And $10 Million Dollars (Definitely Lost).

EXPECTED LOSS-BENEFIT CALCULATION FOR ALTERNATIVE #3:

EXPECTED BENEFIT = $10 Million Dollars (Definitely Saved);

EXPECTED LOSS = Two Species (On Average) Lost (Probability Of 1/1,000,000 x 1,000,000 Species Potentially Lost And One Other Species Definitely Lost).

RISK = BADNESS OF A CONSEQUENCE MULTIPLIED BY ITS PROBABILITY [p. 187].

Difference between #1 and #2 illustrates the phenomenon of RISK AVERSION (for those who know statistics, a more descriptive term would be VARIANCE AVERSION): Most people, if presented with two identical risks (expected losses) will be averse to (seek to avoid) the one with the lower probability of a very large possible loss; and they will be inclined towards (inclined to accept) the one with the higher probability of a smaller possible loss. Thus, a risk averse person will choose Alternative #2 over Alternative #1, to avoid the possibility of the much worse outcome of 1,000,000 species lost.

The Ehrlichs believe that it is RATIONAL to be RISK-AVERSE; and that as applied to environmental decisions (e.g., global warming) the result is that we should be willing to accept very substantial SURE LOSSES (in money expended) in order to avoid (not precisely determinable) LOW (or in some cases high) PROBABILITIES OF (not precisely determinable) DISASTROUSLY LARGE LOSSES.

What is a ZERO-INFINITY PROBLEM [p. 189]?

What is a LIKELY-INFINITY SITUATION [p. 189]?

ALTERNATIVE #1: PAY $10 MILLION DOLLARS FOR THE HABITAT THAT WOULD DEFINITELY SAVE ONE SPECIES FROM EXTINCTION, BUT THERE IS SOME NOT PRECISELY DETERMINABLE PROBABILITY (VERY CLOSE TO ZERO) THAT SOME NOT PRECISELY DETERMINABLE NUMBER OF SPECIES WOULD BECOME EXTINCT, WHERE THE NUMBER COULD BE ANYWHERE FROM 1000 TO 10,000,000 DIFFERENT SPECIES.

ALTERNATIVE #2: PAY $10 MILLION DOLLARS TO ELIMINATE THE NOT PRECISELY DETERMINABLE PROBABILITY (VERY CLOSE TO ZERO) THAT SOME NOT PRECISELY DETERMINABLE NUMBER OF SPECIES WOULD BECOME EXTINCT, WHERE THE NUMBER OF SPECIES COULD BE ANYWHERE FROM 1000 TO 10,000,000 DIFFERENT SPECIES, BUT THEN IT IS CERTAIN THAT ONE SPECIES WILL BECOME EXTINCT.

ALTERNATIVE #3: SAVE $10 MILLION DOLLARS. IT IS CERTAIN THAT ONE SPECIES WILL BECOME EXTINCT. IN ADDITION, THERE IS A NOT PRECISELY DETERMINABLE PROBABILITY (VERY CLOSE TO ZERO) THAT SOME NOT PRECISELY DETERMINABLE NUMBER OF SPECIES WOULD BECOME EXTINCT, WHERE THE NUMBER OF SPECIES COULD BE ANYWHERE FROM 1000 TO 10,000,000 DIFFERENT SPECIES.