Risk-Benefit Analysis: Definition & Example

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  • 0:00 What Is a Risk-Benefit…
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Lesson Transcript
Instructor: David Wood

David has taught Honors Physics, AP Physics, IB Physics and general science courses. He has a Masters in Education, and a Bachelors in Physics.

What is a risk-benefit analysis? Learn about the information and steps needed to complete a risk-benefit analysis, and go through an example of how it's used in medicine.

What Is a Risk-Benefit Analysis?

Every day when you leave your house you're taking a risk. When you cross the street, you might get hit by a car. When you drive down the highway, you never know what other drivers are going to do. When you get to school, if you sit at your desk all day that might affect your health. So if all these things are risky, why do we do them?

Well, we do them because we feel the benefits outweigh the risk. If adults stopped going to work because they were afraid of getting into a car accident, the economy would collapse. If you refused to eat anything that might turn out to be bad for you after more research 50 years from now, there would be hardly anything you could eat. Everything we do is a balance between the risks and benefits, even when we don't know it.

A risk-benefit analysis is a comparison between the risks of a situation and its benefits. The goal is to figure out whether the risk or benefit is most significant. It's used often in medicine, because every medical procedure has risks associated with it, and some procedures that could be beneficial actually turn out to statistically cause more harm than good. That's how medical researchers figure out whether certain procedures are worth doing and what types of people will benefit.

But risk-benefit analyses are useful for everyone. Most of us make our decisions fairly subconsciously. By actually thinking about the risks and benefits, we can make better decisions about our lives. To complete a risk-benefit analysis, there are four main pieces of information you need:

  1. What are the risks?
  2. How likely are the risks to happen?
  3. What are the benefits?
  4. How likely are the benefits to happen?

Let's go through an example of how this works.

Examples of Risk-Benefit Analyses

Let's say that there's a new disease called horribilitis. It's really awful, painful, and causes people to eventually die, even at a young age. There is a test that can see if you have horribilitis before you even have symptoms. And we want to know, should we screen the whole population to find out who has it nice and early?

To figure that out, we have to do a risk-benefit analysis. First of all, what are the benefits of doing the screening? Well, that should be pretty obvious: We will find out who has the disease and be able to treat it. But before we can really see how great the benefit will be, we need more information. We need to know two main things: How successful is our treatment of it? And will finding it early make treatment more successful? Sometimes, you find that research shows that early treatment makes little to no difference. But let's assume that we have some great treatments that can help, and treating the disease early will make people much less likely to die.

That's great, but we're not done. We have to look at the risks. Every medical procedure has some risks. What are the risks? Well, perhaps the testing procedure itself can cause harm. If you have to undergo surgery, it's possible to die on the operating table or by an infection you got during the surgery. The other risk is that the test will find that you have horribilitis even though you really don't. Basically every test in the world has something called a false positive rate: the number of people who don't really have a disease, but the test for the disease says they do. Those people will end up with a treatment that isn't necessary, because there isn't anything really wrong with them.

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