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[en] Our willingness to embrace climate change policies depends on our perception of their benefits and costs. Evaluation of these costs and benefits requires careful economic analysis. Yet the standard tools for such assessment - computable general equilibrium (CGE) models - are inadequate on several grounds. Their underlying theory suffers from well-known logical difficulties; in general, their equilibria may be neither unique, stable, nor efficient. Moreover, real-world phenomena such as increasing returns to scale, learning, and technological innovation are neglected in CGE models. These phenomena make the resulting equilibria in the models inefficient; in the real world they can lock society into sub-optimal technology choices. They introduce uncertainty and path-dependence, annihilating the concept of a single efficient allocation produced by the unfettered market. Yet conventional economics assesses the cost of policies solely on the basis of their departure from a purportedly efficient equilibrium - ignoring deeper structural changes that are often decisive in practice. New socioeconomic theories and models are emerging that allow for bounded rationality, the limiting and enabling character of institutions, technological change, and the complexities and uncertainties in economic evolution. Meanwhile, existing models should be modified to better reflect real-world phenomena and to abandon unfounded assumptions about the inherent ''inefficiencies'' of government intervention in the market. (author)
[en] The cost-benefit study of Nordhaus (1994) is representative for the neoclassical approach towards global warming. Nordhaus found that no substantial emission cuts are warranted. Most of his critics have concentrated on the issue of discounting and demanded that a lower discount rate should be applied. These criticisms first miss the point and second lead to ethically dubious, inconsistent conclusions and inefficient policy choices. They miss the point because the real problem of Nordhaus's methodology is his implicit underlying assumption of perfect substitutability between natural and other forms of capital. Given the validity of this assumption, lowering the rate of discount is inconsistent with current savings behaviour, is ethically dubious because future generations will be much richer than the current one anyway, and is inefficient because scarce financial resources are channelled into emissions abatement that exhibits rates of return far inferior to alternative public investments. Any call for aggressive emission abatement must therefore directly attack the perfect substitutability assumption of neoclassical economics. The real disagreement is about whether consumption growth can compensate for environmental degradation caused by global warming. Discounting is not the issue, but substitutability is. (author)
[en] Coastal flood defense systems can consist of multiple lines of defense. In case of a system with a front and a rear defense (e.g. a storm surge barrier and levees), the front defense can improve the reliability of the rear defense by reducing the load on this rear defense. This paper develops a framework in order to assess whether including the influence of such a load reduction influences the economically optimal safety targets of both defenses. The economic optimization is carried out using two approaches: a simplified method developed to explore the behavior of the economic optimization with a front and rear defense, and a numerical framework geared towards practical applications. The numerical framework provides more flexibility in defining risk, cost and damage functions, and emphasizes on the applicability and tractability of the necessary steps from an engineering perspective. Both approaches are used in a hypothetical case study in order to quantify the effect of including a load reduction on the economically optimal safety targets. The results indicate that if a front defense can create a significant risk reduction in a cost efficient manner, more efficient economically optimal safety targets can be found by including the load reduction. - Highlights: • In a coastal system, a front defense improves the reliability of the rear defense. • This interaction is analytically incorporated in a simplified economic optimization. • For more complex (realistic) economic optimization, a numerical framework is proposed. • Including the interaction of a coastal system improves flood prevention investments.
[en] Depending on the constantly increasing demands on assessment of investment projects, especially assessment of large-scale projects in transport and important European projects with wide impacts, there is constantly increasing focus on risk management, whether to find mitigations, creating corrective measures or their implementation in assessment, especially in the context of Cost-Benefit analysis. To project assessment is often used implementation of certain risk variables, which can generate negative impacts of project outputs in framework of assess. Especially in case of transportation infrastructure projects is taken much emphasis on the influence of risk variables. However, currently in case of assessment of transportation projects is in Czech Republic used a few risk variables, which occur in the most projects. This leads to certain limitation in framework of impact assessment of risk variables. This papers aims to specify a new risk variables and process of applying them to already executed project assessment. Based on changes generated by new risk variables will be evaluated differences between original and adapted assessment. (paper)
[en] By analogy with the concepts of human learning, we show and introduce a new method to obtain least product cost and price that includes the effect of innovation and technological learning in manufacturing and production. This key result is a new paradigm instead of the usual economic 'power law' formulation. The new analysis is based on extensive analysis of many technological systems, and is directly related to the presence of learning as experience is accumulated. The results agree with the observed data. By using a consistent basis, the method replaces previous empirical 'power law' descriptions of the technological learning curve with a new 'marginal minimum cost equation' (MCE). (author)
[en] A methodology for the optimisation of the countermeasures associated with the contamination of animal products was designed based on cost-benefit analysis. Results are discussed for the hypothetical deposition of radionuclides on 15 August, when pastures are fully developed in Korean agricultural conditions. A dynamic food chain model, DYNACON, was used to evaluate the effectiveness of the countermeasures for reducing the ingestion dose. The countermeasures considered were: (1) a ban on food consumption; and (2) the substitution of clean fodder. These are effective in reducing the ingestion dose as well as simple and easy to carry out in the first year after deposition. The net benefit of the countermeasures was quantitatively estimated in terms of avertable doses and monetary costs. The benefit depends on a variety of factors, such as radionuclide concentrations on the ground, starting time and duration of the countermeasures. It is obvious that a fast reaction after deposition is important in maximising the cost effectiveness of the countermeasures. In most cases, the substitution of clean fodder is more cost effective than a ban on food consumption. The methodology used in this study may serve as a basis for rapid decision-making on the introduction of countermeasures relating to the contamination of animal products after a nuclear accident
[en] An optimization problem of minimizing the output load of a junction model with multiple input and output channels is solved by the replica method. Simulation results show that for the case of extensive connectivity, the replica solution obtained by assuming a vanishing solution space is satisfactory. However, for the case of intensive connectivity, the degeneracy of the solution space causes the simulation results to deviate from the replica solution of vanishing volume. (author). Letter-to-the-editor
[en] This paper addresses the selective maintenance optimization problem in a multi-component system, carrying out several missions with scheduled inter-mission breaks. To improve the probability of the system successfully completing the next mission, maintenance is performed on the system's components during the break. Each component is assigned a list of eligible maintenance actions ranging from minimal repair, through intermediate imperfect maintenance actions, to replacement. The quality of a maintenance action is assumed to be stochastic, reflecting the degree of expertise of the repairman and the tools used to perform the maintenance action. This quality is thus treated as a random variable with an identified probability distribution. The selective maintenance problem aims thus at finding a cost-optimal subset of maintenance actions, to be performed on the system during the limited duration of the break, which guarantees that the pre-set minimum probability of successfully completing the next mission is attained. The fundamental constructs and the relevant parameters of this nonlinear and stochastic optimization problem are developed and thoroughly discussed. It is then put into practice for a series–parallel system and the added value of solving it as a stochastic problem is demonstrated on some test cases. - Highlights: • A stochastic selective maintenance optimization problem is modeled and investigated. • Each component of the system may be maintained at different maintenance levels. • Variability of maintenance actions' effects are accounted for in the optimization process. • The selective maintenance problem is solved as a nonlinear stochastic optimization program. • Cost-effective maintenance solutions and accurate system's reliability are obtained.
[en] Social cost-benefit analysis is a well-established method for guiding decisions about safety investments, particularly in situations in which it is possible to make accurate predictions of future performance. However, its direct applicability to situations involving large degrees of uncertainty is less obvious and this raises the question of the extent to which social cost-benefit analysis can provide a useful input to the decision framework that has been explicitly developed to deal with safety decisions in which uncertainty is a major factor, namely risk analysis. This is the main focus of the arguments developed in this paper. In particular, we provide new insights by examining the fundamentals of both approaches and our principal conclusion is that social cost-benefit analysis and risk analysis represent complementary input bases to the decision-making process, and even in the case of large uncertainties social cost-benefit analysis may provide very useful decision support. What is required is the establishment of a proper contextual framework which structures and gives adequate weight to the uncertainties. An application to the possibility of a robbery at a cash depot is examined as a practical example.