Sunday, May 29, 2011

Externalities of Deepwater Horizon platform of BP and the Fukushima Daiichi nuclear plant

An externality is a positive or negative effect of some economic agents, not transmitted through any charge or payment, affecting consume or production of other agents. Pollution and risks generated by dangerous activities are some examples of negative externalities.

Many projects are economically feasible because of the lack of control over negative externalities. The Deepwater Horizon platform of BP and the Fukushima Daiichi nuclear plant have something in common: the time has showed that the externalities were underestimated.

How to estimate externalities of risks of a project?. A not graduated student of engineering can do it. The cost of externalities is the sum of different risks multiplied by the impact of those risks. The problem is not how to estimate risks; the problem is the lack of will to do it.

The overall cost and benefit to society is defined as the sum of the economic benefits and costs for all parties involved (the stakeholders). Simplifying, the society has to avoid participate in any way in projects with an overall expected cost bigger than expected benefit. A good way to do this is charging a bad project with the expected cost of externalities, converting that project in an economically unfeasible one.

Projects are my passion. I'm not proposing to stop doing projects. I'm proposing to work with social responsibility, performing a good Stakeholder Management.

Propose projects with clear negative externalities, is a matter of extremely incompetent engineers and bad persons. A good Project Manager has to be conscious of the externalities of his projects. The Code of Ethics and Professional Conduct of PMI declares that "We make decisions and take actions based on the best interests of society, public safety, and the environment".

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