Accession Number : ADA131637

Title :   Behavior under Uncertainty and Its Implications for Policy.

Descriptive Note : Technical rept.,

Corporate Author : STANFORD UNIV CA CENTER FOR RESEARCH ON ORGANIZATIONAL EFFICIENCY

Personal Author(s) : Arrow,Kenneth J

PDF Url : ADA131637

Report Date : Feb 1983

Pagination or Media Count : 26

Abstract : A key tool in the modern analysis of policy is benefit-cost analysis. The underlying theory is that of notion of economic surplus. Without going into technical details, the essential steps in the actual calculation of a surplus depend on using choices made in one context to infer choices that might be made in different contexts. If we find how much individuals are willing to pay to reduce time spent in going to work by one method,. e.g., buying automobiles or moving closer to work, we infer that another method of achieving the same saving of time, e.g., mass transit or wider roads, will be worth the same amount. Frequently, indeed, we extrapolate, or interpolate; if it can be shown that the average individual will pay $1,000 a year more in rent to reduce his or her transit time by 30 minutes, we infer that a reduction of 15 minutes is worth $500.

Descriptors :   *Cost analysis, Probability, Cost effectiveness, Extrapolation, Interpolation, Policies, Economic models

Subject Categories : Economics and Cost Analysis
      Statistics and Probability

Distribution Statement : APPROVED FOR PUBLIC RELEASE