Risks and Trade-Offs
Robert L. Hershey
About the Lecture
Risks and trade-offs affect the decisions we make as individuals and as a society. How much money does a bettor lose and how much money does the state make on an average lottery ticket? Is it advantageous to buy collision insurance for a car? These questions involve the "mathematical expectation" what you can expect to gain minus what you can expect to lose. What is the probability of glass breaking under dynamic loading, such as wind, blast, or sonic boom? A protective laminated glass barrier has been proposed for the White House by architect Arthur Cotton Moore. What are the trade-offs of using such a glass barrier in reopening Pennsylvania Avenue? The closing of Pennsylvania Avenue has cost tens of millions of dollars per year in lost time due to traffic congestion. Trade-offs also occur in considering the costs of pollution controls. Examples of controlling particulate emissions in Eastern Europe will be discussed.
About the Speaker
Robert L. Hershey received his B.S. summa cum laude in mechanical engineering from Tufts University in 1963 and his M.S. in mechanical engineering from MIT in 1964. He received his Ph.D. in engineering from Catholic University of America in 1973. His doctoral dissertation was a statistical model to determine the probability of glass breakage under dynamic loading. He has held engineering and management positions at Bell Telephone Laboratories, Weston Instruments, BBN, and Booz Allen and Hamilton. As Division Vice President of Science Management Corporation, he ran the firm's Washington operations, consulting in energy and environment. Since 1988, he has been a consulting engineer in program planning. He has written articles for the Horizon section of the Washington Post, and he is the author of the book "How to Think with Numbers."
President Spargo called the 2114th meeting to order at 8:15 p.m. on February 11, 2000. The Recording Secretary read the minutes of the 2113th meeting and they were approved.
The speaker for the 2114th meeting was Robert L. Hershey. The title of his presentation was “Risks and Trade-Offs”.
The experience of most people in their everyday lives is “you pays your money and you takes your choice.” In his 1982 book How to Think with Numbers, Mr. Hershey attempted to address how people should logically go about doing this.
The mathematical expectation is what you, the game player, can expect to gain minus what you can expect to lose. It is calculated by summing over all possible events the yield for an event times the probability for that event, or
e = Si pi • yi where Si pi = 1
Positive or negative yields for an event would be its benefit or cost, respectively. When the probabilities can be adjusted and the expectation does not remain constant, the game player, or engineer, will generally be trading-off changing benefits for some events while accounting for countervailing changes in costs for others. For example, in one case you might be able to increase the benefit of a particular event by trading-off an increased probability for a less desirable outcome. The objective is to increase the expectation.
Such risks and trade-offs are the inherent in the even the most basic decisions we make as individuals and as a society. Is it advantageous to buy collision insurance for a car? How much money does a bettor lose and how much money does the state make on an average lottery ticket?
Especially in Washington, risks and trade-offs of this sort can become matters of life, death and the Federal Budget. A protective laminated glass barrier wall has been proposed for the White House by architect Arthur Cotton Moore. What are the trade-offs of using such a glass barrier and reopening Pennsylvania Avenue? The closing of Pennsylvania Avenue has cost tens of millions of dollars per year in lost time due to traffic congestion. What about more cost effective approaches incorporating such barriers within the White House windows and façade?
Trade-offs are common in calculating the costs of pollution controls. In a 1992 AID funded DOE program, Mr. Hershey studied pollution in the Czech Republic at Cesky Krumlov, there were 1012 tons of particulate emissions per year emitted by the central heating plant using local coal. The particulate emissions for all sources were 1491 tons per year. By implementing effective electrostatic precipitators, the emissions of the heating plant were reduced to 4 tons per year. In accounting a “figure of merit” is any measure that provides a fair means for comparing choices. In this case, the figure of merit is the cost per ton of particulate emissions removed. The cost per ton for equipping the heating plant with particulate control was $225.
Mr. Hershey kindly answered questions from the floor. President Spargo presented Mr. Hershey a small token of the Society's thanks. Treasurer Ken Haapala addressed the Society on membership. The President announced the next meeting, made the usual parking and beverage announcements, and adjourned the 2114th meeting to the social hour at 9:30 p.m. [These minutes were corrected by the Recording Secretary after they were read at the request of the speaker.]
John S. Garavelli