[CEUS-earthquake-hazards] Societal Implications of Performance Based Earthquake Engineering

[Seth Stein]

Lawrence and Joe:

There's a literature dealing with this issue, which is important is
developing rational hazard policy. It's generically called an 
"externality". It's when individual actions confer benefit on (in this 
case) or do harm to a broader circle of people than are involved in the
economic transaction itself. In this case, society may benefit from 
measures that may not make sense for an individual property owner.

There are various ways of trying to assess and address this, so as to
decide what makes sense and be fair to all.

As in so many things, Wikipedia has a good summary that's easier to get 
quickly than going back to an economics book

"An external benefit, on the other hand, may increase the utility of 
third parties at no cost to them, which could be called "free lunch". 
Since the collective utility of society is improved but the direct 
participants have no way of monetizing the benefit, less of the good 
will be produced or consumed than would be optimal for society as a 
whole. Goods with positive externalities include education (believed to 
increase overall productivity and therefore well-being but widely 
disputed as these benefits of education can be considered as 
internalized) and health care (which may reduce the health risks and 
costs for third parties for such things as transmittable diseases). 
Positive externalities are frequently associated with the free rider 
problem. For example, individuals who are vaccinated reduce the risk of 
contracting the relevant disease for all others around them, and at high 
levels of vaccination, society may receive large health and welfare 
benefits; but any one individual can refuse vaccination, still avoiding 
the disease by "free riding" on the costs borne by others."

part of

http://en.wikipedia.org/wiki/Externality

-- 
Seth Stein
William Deering Professor
Department of Earth and Planetary Sciences
1850 Campus Drive
Northwestern University, Evanston, IL 60208
(847) 491-5265 FAX: (847) 491-8060 E-MAIL: seth at earth.northwestern.edu
http://www.earth.northwestern.edu/people/seth