RMI 2302 Exam 2

consumer interests
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consumer interests
The free market fails to protect what? requiring the government to find appropriate ways to protect us from ourselves
externalities, less on consumers
In a world dominated by rational behavior, the government could focus on .....? and focus less on ....?
true
True or False? Government is balancing competing goals
design polices that maximized people's happiness, increasing their pleasures and reducing their pains.
Jeremy Bentham urged politicians to ...
No good ways to measure people's hedonic well-being
Jeremy Bentham had no what?
Scientific measurement of well-being has advanced significantly , so Kahneman is trying to bring policy making back to Bentham
Daniel Kahneman made a scientific measurement of what?
Proposed that we develop national measure of well-being, akin to GDP measures.
If money doesn't necessarily make people happy, why should we emphasize ramping up GDP?
Ed Diener and Martin Seligman
proposed what?
Wrote in New Republic that happiness research has shown us that "we know there is some significant subset of people likely to be made better off through heavier taxation, and that these people reside at the top end of the wealth distribution."
Barry Schwartz wrote what?
John Stuart Mill
Who was a critic of bentham?
Came to believe happiness is not found by seeking ordinary pleasure, but, instead, by striving for loftier goals. Believed the goal of moral and political action should be to maximize people's happiness, didn't reject utilitarianism but tried to make it compatible with a broader view of human nature than Bentham
John Stuart Mill believed what?
HAPPY PIGS If people can achieve moment-to-moment happiness in horrible circumstances, what does that say about Bentham's world? Said poverty doesn't make people nearly as miserable as one would think it ought to. "Happy slave" problem - if one has been a slave since birth and has known no other life, should we accept his slavery because he is happy?What did Amartya Sen believe?a world full of happy slavesKahneman's ideas ignore the things people care about in life beyond moment-to-moment good mood. Implies there is nothing wrong with what?Income distribution Unemployment GDP Infant mortality Crime Air qualityEconomists measure what?social gainsIn other words political gain outweighs...?Measured using expected utilityIndividuals are measured using...Orgs. use expected valueorganizations are measured using...Only reward systemic risk Not diversifiable riskfor organizations CAPM (Capital Asset Pricing Model) only reward what? not what?Measuring reward to society is difficult (reward of national parks?) Many times government is the only entity able to take on risk, regardless of rewardIn Government and society it is difficult to measure what?Subjective view/probability - different from objective Many sources Alter the decision making Problem when it ends up being significantly different from the modelWhat is a bias?"There are the known knowns. These are the things we know. There are the known unknowns. That is to say, there are things we know we don't know. But there are also unknown unknowns. These are the things we don't know we don't know."Donald Rumsfeld said what?Age biases Cultural biases Experience biases Gender biases Media biasesWhat types of bias are there?Financial - Most incentives Moral - "do the right thing" Natural - "curiosity, fear, anger, pain, joy, pursuit of happiness" Coercive - negative reinforcement Personal vs. socialWhat types of incentives are there?incentive systemsStudy of Economics is basically a study ofAny condition or situation that presents a possibility of loss, regardless of whether that loss actually occurs.what is a loss exposure?Asset exposed to loss Cause of loss Financial consequences of the losswhat are the 3 elements to a loss exposure?Insomnia, weight loss, decreased appetite, jitteriness Increased risk of cardiovascular problems Exacerbate depression, psychosis, anxiety Potentially addictive Decreased performance over time Paranoia, aggression, irritabilitywhat are the risk of smart pills?Improved performance on learning tasks such as memorization, especially for longer term memory (more than one day) & since education now seems to be a competitive sport... Need to be on drug while studying, not when taking exam Not clear you can remember more stuff at one time (working memory)what is the reward of smart pills?Smoke marijuana Skip class Lower GPAsusers of smart pills are more likely to ...Yes, they are dangerousPoints out problems in health care system: Quick diagnosis Ability to manipulate/feign symptoms Quick to medicate Doctor shoppingAlan Schwartz says what about smart pills?No different than other stimulants, e.g. caffeine Just more sophisticated They work, so use themJoshua Gowin says what about smart pills?prices, regulation, competition, etc... Very broad category, many will define as risk caused by operational, hazard, financial or strategic risksBusiness risk can be caused by..Potential losses from internal sources -Manufacturing processes -Fraud -Mismanagement -Employee mistakesOPerational risk for businesses and corporations include...Typically used in insurance industry to describe potential losses that only have a down side (pure risks), e.g. fire, auto accident, tornado, earthquake, etc...Hazard Risk for corporations are typically used inLosses due to exchange rate, investment losses, credit risks, liquidity risks, etc...Financial Risk for Corporations include...Potential losses (variation) from poor business decisions Product mix Supplier choice Financing options Many decisions fall under "strategy", if any of them are wrong/faulty => strategic riskStrategic risk for corporations include...Lack of safety leadership" "inadequate resources for safety" "independent panel to review safety"The CSB report for BP said what?we may not have broken laws, but broke our values"BPs response for CSB was?BP response - shut down oil fields 8% drop in US oil production 16 of 22 miles of pipe needed to be replacedBps response to the corroded pipe was to do what? what happened to oil production?$21.3M fine by OSHA 300 willful violations of OSHA rules BP endangered workers to cut costsThe explosion at the texas city refinery resulted in...?"ineffective leak detection system" Pipeline had several defects (internal corrosion) BP used a different inspection system (UT technology vs. pipeline inspection guages (PIG))the Pipeline and Hazardous Materials Safety Administration said the leak happened because of...Critical of BP's approach to process safety Failed to give process safety the same emphasis as other initiatives including environmental and other safety initiatives Should have paid more attention to previous incidents (chemical releases & fires) Refineries did not get the same importance as exploration Decentralized management and entrepreneurial culture delegated substantial discretion to plant managers without outlining expectations regarding process safety, responsibility, or accountability Communication lacking Contract vs. union workforce problemsWhat was the baker report?Process safety leadership (top down) Process safety management system Process safety knowledge and expertise Process safety culture Clearly define expectations and accountability for process safety Support for line management Leading and lagging performance measures for process safety Process safety auditing Board monitoring Industry Leaderwhat were the 10 recommendations for the baker report?Data mining Buying trends Targeted marketingWe create so much data today, how can organizations use it?Internal fraud, external fraud, products & business practices, damage to physical assets, business disruption, system failures, process management, employment practices, workplace safetyWhat are the different types of risk organizations need to think about, from operational risk to the so-called black swans?An extreme outlier: high impact, hard-to-predict, rare events that generally people don't expect.What is a black swan risk?Globalization, cascading network effect Operational risk - 30% of business lossHow has risk changed in recent years?Tools to predict areas of vulnerability in organizations to black swans and other kinds of risk Look for markers of situations where human behavior can impact operational risk Look for factors that influence human behavior Laziness, fatigue, moral or ethical "opportunities", stressors (debt, job concerns, family issues)Where does data analytics fit in?There were reports that on-site employees were worried about such an event, but no channel to communicate BP didn't monitor systems closely, costly to do so, cut cornersCould data analytics have helped BP?Systems are pretty good at looking for potential risks ignoring the human element Behavioral analytics adds that examination of the human component, mixed with statistics and external analysis More complete or "intelligent" risk analytics.What is the future of behavioral analytics? why is it so good?Patients "Doctor Shopping" Physicians quick to medicate patients Patients being able to feign symptomsWhat are some serious problems in the US health care system according to smart pills article?Increase the discount rateWhat effect do political incentives have on the discount rate used to make governmental decisions?No natural risk aversion Discount cash flows back to present value to make decisions Cost of capital is commensurate with riskiness of the organizationorganizations have no natural what? They discount what back to present value for what? There cost of capital is what with what?loss exposureWhich of the following best describes a condition/situation that presents a possibility of loss, regardless of whether that loss actually occurs? Loss exposure Natural hazard Peril None of the aboveNaturalCuriosity is an example of which type of incentive?Individual Organizational SocietalIncentives exist at what levels?NegligenceWhich of the following are types of damages NOT awarded in liability cases: General Special Punitive NegligenceResponsible party of lossWhich of the following is NOT one of the three elements to a loss exposure? Asset exposed to loss Cause of loss Responsible party of loss Financial consequence of lossDeath with financial obligations remainingPremature death is defined as: Death before life expectancy Death before age 70 Death with financial obligations remaining Death before DiscoIncentive systemsEconomics is the study of: The economy Incentive systems Global production Decision making None of the aboveCorporate Culture Workplace Safety Process Management Public RelationsWhat are the over riding themes of the Bp case?Targeted marketing Mitigating risky business practices Predicting Black SwansBig data can be used for:Hazard RiskWhich of the following best describes pure risks (e.g., fire, auto accident, hurricane, etc.)? Operational Risk Hazard Risk Black Swan Risk None of the aboveTrueTrue/False: Reputational risk can be considered a subset of strategic risk. True FalseBusiness RiskWhich of the following best describes the possibility a company will have lower than anticipated profits, or that it will experience a loss rather than a profit? Operational Risk Business Risk Black Swan Risk None of the aboveOrganic GrowthThe rebranding of BP under Browne did NOT include: Health, Safety, & Environmental (HSE) performance Organic Growth Green Company/Alternative Fuels Environmentally Friendly Oil CompanyVerticallyBP is a what integrated firm?FalseTrue/False: Process safety focuses on personnel safety while OSHA focuses on the prevention of fires and leaks in hazardous production processes. True False