Decision analysis and risk management: Introduction to course

Jouni Tuomisto, THL

Outline for session 1 (28.2.)

• Some basic concepts of decision analysis

• Introduction and objectives of the Darm course

• Practicalities: schedule, website– http://en.opasnet.org/w/Darm

• Group work: decision analysis on swine flu

• Individual work: risk management analysis on swine flu and narcolepsy

• Evaluation and credits

• Intro to the swine flu case in Finland

Outline for session 1 (28.2.)

Introduction and objectives of the DARM course

Practicalities: schedule, websitehttp://en.opasnet.org/w/Darm

Lectures and classroom exercises

Case study exerciseGroup work: decision analysis on swine flu case

Individual work: risk management analysis on swine flu

Evaluation and credits

Guidance, help, and communication

What are DA and RM?

Introduction to the swine flu case in Finland

Probability

• In this course, we take the subjective interpretation of probability:

• Probability is an individual's degree of belief in a statement, given the evidence.

• → Everyone has his/own probability.

• → A person's probability about something may change in time and when the evidence changes.

Probability: a standard

• There are N balls in an urn. They are otherwise similar except that R are red and the rest are white.

• One ball is picked at random (random = in a way you believe that each ball is equally likely to be picked).

• What is the probability that a red ball is picked?

Probability of a red ball

• p(x|K) = R/N, – x=event that a red ball is picked– K=your knowledge about the situation

Probability of an event

• What is your probability that a bus arriving at Kuopio marketplace will be at time (=late less than 5 minutes)?

• We could try to get bus statistics, but there is no time for that. We need the probability now.

• How to proceed?

Probability of an event x

• If you are indifferent between decisions 1 and 2, then your probability of x is p=R/N.

p

1-p

Red

x does not happen

x happens

White ballDecision 1

Red ball

Decision 2

Prize

100 €

0 €

100 €

0 €

Decisions under uncertainty: Trip mode

• You are going from point A to a meeting near the Kuopio market place. Should you take your car or the bus?

• You have a monthly ticket for the bus, so there is no extra cost there.

• However, the bus may be late and the meeting may start without you.

• What are the possible outcomes?

What are the possible outcomes?

• Take the bus, be in time.

• Take your car, be in time.

• Take the bus, be late.

• This is the order of preference, but how much better or worse are they in comparison?

• How to quantify preferences?

Utility as a measure of preference

• Take the bus, be in time. u=1

• Take your car, be in time. u=?

• Take the bus, be late. u=0

• The u(best outcome)=1, u(worst outcome)= 0.

• How to assess those in between?

Utility of an event x (Car, in time)

• Adjust p in such a way that you are indifferent between decisions 1 and 2.

• Then, your utility u(x)=pt.

pt

1-pt

Bus, late

Bus, in time

Decision 1Car, in time

Decision 2

Utility

?

0

1

Decision analysis of trip mode choice

• Calculate your expected utility for each decision and choose the highest.

• E(u(D1,x))=u*1; E(u(D2,x))=1*pt+0*(1-pt)=pt

pt

1-pt

Bus, late

Bus, in time

Decision 1Car, in time

Decision 2

Utility E(u)

u u

0

1

pt

Decisions by an individual vs. in a society

• In theory, decision analysis is straightforward with a single decision-maker: she just has to assess her subjective probabilities and utilities and maximize expected utility.

• In practice, there are severe problems: assessing probabilities and utilities is difficult.

• However, in a society things become even more complicated:– There are several participants in decision-making.– There is disagreement about probabilities and utilities.– The decision models used are different.– The knowledge bases are different. NOTE! In this course,

"knowledge" means both scientific (what is?) and ethical (what should be?) knowledge.

Societal decision example: bus transport in Kuopio

• Buses are often late, thus many inhabitants in Kuopio prefer cars.

• Should the city subsidise to improve bus service and thus increase bus trips?

– Increase in living conditions.

– Less pollutants.

– More attractive city.

– BUT: It costs money.

– Actions may be ineffective etc.

Bus transport subsidies in Kuopio?

• Who defines the problem? Whose utilities?

p(improve)

Decision: BAU

pt 0 € ? ?

? 100 k€ ?? 100 k€ ?? 100 k€ ?

? 100 k€?Decision: subsidise with 100 k€

p(in time), cost #trips E(u)

?

p(# trips increase)

Theoretical solution: everyone can participate

• Risk management and decision analysis methods should allow for this.

Wiki pages with questions and answers are used to organise information needed

Statements and argumentation are used to organise different opinions.

Objectives of the course.The student should:

• Get a good overview of modern assessment methods.

• Learn basic concepts of decision analysis.

• Learn to use decision analysis in practice.

• Understand the connections between societal decision-making and decision analysis.

• Be able to apply the scientific method and falsification in the context of decision analysis.

• Know how to build a decision analysis based on the requirements of risk management.  

• Be able to utilize modern web workspaces for decision analysis.

Schedule of the course

– http://en.opasnet.org/w/Darm

Lectures and classroom exercises

Theory of DA & RM

Swine flu story discussionsConsidering the theory in a practical context

ExercisesCalculation exercisesUsing Opasnet

Case study exercise

Analyze the swine flu case and consider yourself as giving advice to the Ministry of Social and Health affairs of FinlandWhat could be learned from the swine flu case for

improving public health risk management in Finland?

Exercise consists of two parts:Decision analysis study plan (group work)Risk management analysis (individual work)

Case study exercise description and instructions: http://en.opasnet.org/w/Category:DARM_exercise

Decision analysis study plan

Plan a decision analysis study on the swine flu caseBackground description

Purpose and scope of the study

Analysis plan

(Expected) resultsIf possible, the plans can try to be realized, at least

partially

Write the plan in Opasnet

Group work 3-4 people/group

Recommended: at least one fluent in Finnish in each groupSome swine flu case material only available in

Finnish

Risk management analysis

Analyze risk management in the swine flu case and consider alternative ways to making itBackground (cf. DA study plan background)RM in the swine flu caseAlternative approach to (a part of) RM in the swine fluAlternative vs. actualConclusions and recommendation (for the Ministry)Write your report in Opasnet

Individual workNot limited by the scope of the DA study plan of the

group one attended

Hints to making case study exercise

Build on: theory lectures and classroom exercises on this course

classroom discussions on the swine flu case as a DA and RM problem

materials listed and linked to on the course web-page

the demonstrator DA model

assessments in Opasnet

descriptions of assessment and variable objects in Opasnet

other related information e.g. on the web and libraries

your own expertise and opinions

other groups'/individuals' exercise works

Clear and focused scoping is important!

Using Opasnet

Basics: 4.3. 9-12, MC9

Possible problems can be discussed in classroom as they occur

Discussion and argumentation exercise 1.4. 9-12, MC9

Evaluation and credits

DARM: 6 ECTSWhole course obligatory for ToxEn studentsFor others partial accomplishments are also possible

Lectures and classroom exercises: 3 ECTSCase study exercises: 3 ECTS

Decision analysis study plan 2 ECTSRisk management analysis 1 ECTS

Lectures are voluntary, but highly recommendedActive participation practically necessary for successful

accomplishment of exercises

Evaluation and credits

2/3 * exercise grade + 1/3 * classroom exercise grade = overall course grade

Evaluation and credits

Classroom exercise evaluationScoring of some calculation exercises

Marko will explain details at the exercises

Bonus for active participation in classroom

Evaluation and credits

Exercise evaluationDA study plan = 2/3 of the exercise gradeRM analysis = 1/3 of the exercise gradeBonus for active commenting and discussion in

OpasnetClarity and reasoning (not length)

Basis for evaluation (to be) explained in more detail on the case study exercise page

Guidance, help and communication during the course

General arrangements

Case study exercise

Technical help

Commenting and discussion in Opasnet

End

What are DA and RM?

Swine flu case in Finland

What is probability?– 1. Frequentists talk about probabilities only when

dealing with experiments that are random and well-defined. The probability of a random event denotes the relative frequency of occurrence of an experiment's outcome, when repeating the experiment. Frequentists consider probability to be the relative frequency "in the long run" of outcomes.[1]

– 2. Bayesians, however, assign probabilities to any statement whatsoever, even when no random process is involved. Probability, for a Bayesian, is a way to represent an individual's degree of belief in a statement, or an objective degree of rational belief, given the evidence.

– Source: Wikipedia