Professor Forman

Planning for the next Pandemic

Planning and allocating resources for the next pandemic is, today, an obvious thing to do. But if we don’t begin to do it now, it will be difficult to overcome the human tendency for decision makers to gamble on the next pandemic not happening in their lifetime rather than spend $10B to $20B now.

Why is this the case?

For humans, losses loom larger than gains and hence humans are inherently loss averse.

For example, it might take several compliments to a significant other to offset one criticism.

Kahneman and Tversky, in their work cited called Prospect Theory, which was cited in Kahneman’s Nobel prize, showed that because the utility curve for losses is steeper than for gains, humans are risk averse when it comes to gains, but risk seeking when it comes to losses.

The significance of this is that humans would rather gamble on risks not occurring rather than invest today’s money/resources in reducing risks that may never happen.

The Mayor of Houston gambled when he refused, year after year, to invest about $30 million to fix the levies.  The subsequent damage from Hurricane Harvey was estimated to be about $30 billion.

Bill Gates cited an independent international commission estimate that it would have taken at least $4.5 billion a year to protect against pandemics. Today, that amount is dwarfed by the tens of trillions of losses and lives resulting from the Covid-19 pandemic.

In retrospect, it should have been ‘obvious’ to the Mayor of Houston as well as our governmental planners for pandemic risk that ‘an ounce of prevention’ would have been worth much more than the ‘pound of cure’. 

But that doesn’t mean that tomorrow’s planners and leaders will feel the same about future risks, including the next pandemic.  For one thing, our memories are short, and political positions are difficult to change.  There were powerful movements toward gun control following each of the mass school shootings in the past few years.  Yet the movements fizzled out. 

Another reason why it’s difficult to convince decision makers to invest in reducing risks, any one of them which may never happen (but according to the law of large number, on the average some will) is that without some way to quantify the risks and benefits of investing today to reduce risks in the future, it is impossible to demonstrate in a convincing way that an ounce of prevention is worth more than a pound or ton of cure.  It is too easy to dismiss arguments based on analogies to past events, or qualitative arguments, or even quantitative arguments that are not comprehensive or scientifically valid.

Quantitative analytics that are comprehensive (take into account values as well as dollars) and scientifically valid are required in order to convince decision makers to invest in reducing risks for events that may never happen. After all,  it isn’t always true that an ounce of prevention is worth more than a pound of cure.  The ‘worth’ must be based on comprehensive, scientifically valid quantified estimates of the likelihoods, impacts and costs to control risks.

In an April 2020 article in Brinknews, Mark Trexler wrote: “The problem with COVID-19 has not been a lack of dedication and expertise among health professionals; rather, it’s the chronic shortfall in the political and budgetary prioritization of pandemic preparedness. Such preparedness need not have been overly costly; by one estimate, the global cost of being prepared for a pandemic like COVID-19 works out to $1-$2 per person. That’s a trivial amount, in hindsight.”

In order to address the shortfall in the political and budgetary prioritization of pandemic preparedness, improved risk analytics are required to identify specific risks, estimate their likelihoods and impacts, using both data as well as human judgment, and in a comprehensive, scientifically valid process.

Such a process has been in development for the past six years and is now available to help guide decision making bodies in arriving at sound, defensible decisions when planning for the future pandemics.
See also: 7 elements of Risk Measurement that Deliver Analyses Your Senior Leadership Needs

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