Equity and Public Risk

Possible fatalities to members of the public are defined in this paper as public risk. Given other things are equal, such as the benefits to individuals in society, there may be a preference for an equitable balancing of individual risks. This concept of equity is defined and it is shown that any utility function over number of fatalities which exhibits this equity condition must be risk prone. Commonly used indicators, such as the average risk per person and the expected number of fatalities, do not promote equity. An attitude of aversion toward catastrophes is defined and shown to conflict with risk equity.

Duke Scholars

Author Ralph L. Keeney Fuqua School of Business