何毓琦的个人博客分享 http://blog.sciencenet.cn/u/何毓琦 哈佛(1961-2001) 清华(2001-date)

博文

How to make decisions – A real-life example 精选

已有 5844 次阅读 2016-5-6 04:25 |个人分类:生活点滴|系统分类:海外观察

For new readers and those who request to be “好友 good friends”  please read my 公告first.


I have talked previously about decision analysis, a subtopic under the rubric  of Operations Research

1.  http://blog.sciencenet.cn/home.php?mod=space&uid=1565&do=blog&quickforward=1&id=495058

2.  http://blog.sciencenet.cn/blog-1565-505688.html

Recently my home town had a town wide vote about property tax increase in order to re-furbish our middle schools. Residents had to  decide whether or not to vote for a tax increase to fund the renovation. This is how I reached a decision to vote  yes or no and demonstrate how one can rationally decide on something that effect ones lives everyday.

First what are the facts that I know and can assume:

1.  All our children have left Lexington schools more than 25 years ago.  Thus, the tax increase do not directly benefit me and will be a direct additional  cost for living in Lexington

2.  The town has estimated that the average tax increase for each household  will be 250.00 dollar per year (you may use other figures to estimate your  increase if you believe your home costs more or less. I used this figure for  illustrative purposes only and feel it is good enough for me)

3.  I use a figure of 10 years to do the cost/benefit analysis again you can substitute your own figures. Thus, in my case the total cost over 10 years will be 2500.00 dollars if I vote yes.

4.  The proponent of this measure argued that the renovation of the schools will  keep Lexington desirable and keep up the real estate prices of the town. There are certainly truth to this view.

5.  Thus,to assess the cost of NOT doing the renovation, I made the following assumption:

o  With 50% chance there will be a 1% less increase in real  estate price of a house for the next 10 years

o  With 25% chance there will be a 2% less increase in real  estate price of a house for the next 10 years

o  With 25% chance there will be no effect on real  estate  price for the next 10 years

6.  Usingthe average price of a Lexington house at half a million dollars, then the indirect cost of NOT doing the renovation will be  500,000 times(0.5x1%+0.25x2%+0.25x0.0)=2500+2500+0=5000 dollars of  indirect cost.

7.  Comparing#3 vs #6 it is clear how I voted.

8.  This is decision analysis is its simplest form. More generally, of course

o  the decision tree may involve more choices(branches) and more  outcomes

o  the consequences of each outcome may be more difficult to assess. Money is often not the only measure. The Utility of a consequence often are multidimensional.

o  the probability (uncertainties) associated with each choice  may be more difficult to assess

But the point here is the framework for decision that “decision analysis” provides.  Instead of “gut feeling or emotion” the methodology provides a rational  basis for debate and decision making. It concentrates the debate about assumptions and data and removes the logic and process of decision making from debate/discussion and muddying the waters. However, good decision does not guarantee   necessarily a good outcome because of the uncertainties.  For example in the  above case if the conditions of the school turnout not effecting the real estate  prices in ten years, then my choice should have been different by hindsight.


 Man proposes and God disposes.




http://blog.sciencenet.cn/blog-1565-975205.html

上一篇:Water and Las Vegas
下一篇:[转载]清华大学与波士顿大学战略合作协议
收藏 分享 举报

7 许培扬 史晓雷 鲍海飞 邢志忠 邵鹏 李天成 cccy

该博文允许注册用户评论 请点击登录 评论 (5 个评论)

数据加载中...

Archiver|手机版|小黑屋|科学网 ( 京ICP备14006957 )

GMT+8, 2017-9-20 12:01

Powered by ScienceNet.cn

Copyright © 2007-2017 中国科学报社

返回顶部