Changes between Version 1 and Version 2 of EwEugMaximizePortfolioUtility


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Timestamp:
2010-11-23 03:07:22 (9 years ago)
Author:
shermanl
Comment:

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  • EwEugMaximizePortfolioUtility

    v1 v2  
    22'''Maximizing risk-averse log utility for economic and existence values''' 
    33 
    4 One option in the search procedure for optimum fishing patterns is to search for relative fleet sizes that would maximize a utility function of the form w1log(NPV)+w2Slog(B)-w3V, where the wi are utility weights chosen by the user and the utility components NPV, Slog(B), and V are defined as: 
     4One option in the search procedure for optimum fishing patterns is to search for relative fleet sizes that would maximize a utility function of the form w,,1,,log(NPV)+w,,2,,Slog(B)-w,,3,,V, where the wi are utility weights chosen by the user and the utility components NPV, Slog(B), and V are defined as: 
    55 
    66 1. NPV is net present economic value of harvests, calculated as discounted sum over all fleets and times of catches times prices minus costs of fishing, ie the discounted total profit from fishing the ecosystem. 
     
    2222Even for the baseline policy where Ecosim predicts stable ("flat line trajectory") expected or mean biomasses over time, these simulations would likely reveal high variances and complex covariance patterns for most biomasses over time, i.e. we would see wide probability distributions of possible future biomass states for the ecosystem.  We should not be arrogant enough to suggest that we can describe all the uncertainties well enough to accurately calculate the variances of such distributions.  But note that much of that variance in predictions of future biomasses (and hence variance in the value components) would be due to sources of uncertainty and variability that are the same no matter what the policy choice, i.e. would cause about the same amount of variance in predictions for any future harvest policy that we might simulate.  When comparing policy choices using an optimization objective function, there is no point in including extra constant terms that do not change with the policy variables (e.g. a base variance Vo in predictions that does not change with fishing rate policy and just represents uncertainty about any prediction that Ecosim might make).  Hence the V distance measure is meant to represent only extra variance or uncertainty in predictions for policy scenarios that would likely drive biomasses far from the Ecopath mean state. 
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    24 Note that Ecosim does not deliberately advocate or promote any particular risk-averse portfolio approach to public investment in ecosystem harvest and existence values.  Rather, it provides the logarithmic utility function option so that users who do have highly risk-averse attitudes about ecosystem values can identify policy options that would better meet their objectives.  Users should always construct a series of policy scenarios with varying utility weights w1, w2, and w3 on the log utility components, to see how placing different emphases on these components would alter the predicted best policy choice. 
     24Note that Ecosim does not deliberately advocate or promote any particular risk-averse portfolio approach to public investment in ecosystem harvest and existence values.  Rather, it provides the logarithmic utility function option so that users who do have highly risk-averse attitudes about ecosystem values can identify policy options that would better meet their objectives.  Users should always construct a series of policy scenarios with varying utility weights w,,1,, , w,,2,, , and w,,3,, on the log utility components, to see how placing different emphases on these components would alter the predicted best policy choice.