Optimizing Innovation and Calamity
|Research Area:||Volume 4 Issue 1, Jan. 2015||Year:||2015|
|Type of Publication:||Article||Keywords:||Risk Compensation, Risk Homeostasis, Unintended Consequences, Risk Analysis, Failure Rate, Product Safety, Defect Ratio, Failures in Time, Innovation, Productivity|
The aim of this paper is to develop a model to quantify both economic and technical processes (e.g. engineering and policy formation), in regards to safety (or crash rate) and features (innovation). Empirically a relationship may be construed from findings of risk compensation or even risk homeostasis, but these are psychological factors and applicable to individuals, not corporations. Our method is to rigorously derive a microeconomic model showing that risk changes can be explained by utility optimizing providers (businesses, governments, engineers) and consumers (users, citizens). The model terms are development, manufacturing & testing costs, utility to consumers (innovation), crash rate and defect ratio. Results show some unexpected results that may guide corporate or government planning.
Full text: IJEIR-1313_final.pdf