ABSTRACT
Incidents of disease, like other kinds of extreme events, can be costly and are generally uncertain in incidence, location, and severity. This chapter characterizes the economics of such a decision using a 'balance' model that blends ex-ante prevention and preparedness activities (PP) investments with uncertain ex-post response and recovery (RR) expenditures with the ultimate goal of minimizing the total costs of a disease outbreak. Probabilistic risk assessment (PRA) has been advocated and used in many environmental health hazard contexts. Investment decisions in PPRR activities are influenced by a variety of factors, including biophysical realities, economics, politics, behavioral considerations, social acceptability, and scarcity of resources. Some animal diseases are characterized by high morbidity (sickness) and mortality rates along with the capacity to spread rapidly through animal populations irrespective of geographic borders and are called transboundary animal diseases or TADs. The conceptual economic model of this ex-ante/ex-post effort balancing problem is the balance model of Elbakidze (2004) and Elbakidze and McCarl (2006).
