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[AUDIO LOGO] RICHARD DE NEUFVILLE: And so we have basically two topics for today. And the first one is the concept of the value of information. And we're going to end up with two ways of thinking about it. I am going to present in some detail the procedure for the definition of the upper bound on the value of information, the EVPI, which stands for Expected Value of Perfect Information. At the end is a supplement for your interest if you want to is the calculation of the exact value of EVSI, which is a interesting, probabilistic exercise. But I personally don't think that it's very valuable in practice. But it's part of standard curricula, and it's there if you want to go for it. It will not be part of a quiz or anything like that. I think you should know about it, so you can appreciate the other aspect I will be focusing on, so methods. And then I want to stand back from this and talk about information gathering as a basis for having a flexible strate...

[AUDIO LOGO] RICHARD DE NEUFVILLE: So I'm going to explore this basic trade-off between big versus small from an economic point of view in this short presentation. And it's all based on an old analysis from a simple case. And the real situation is more complex. But this analysis leads you to some simple, intuitive understanding of the trade-offs, which is what I want to use. And by the way, this was built upon the experience of building steel plants in India back half a century ago. So here's the picture when it all comes out to. Let me explain the picture first, then let's talk about the explanations. So I have on the horizontal axis is this alpha, which I've been talking about. And he ran the numbers because it's a simple analysis actually, which I'm not going to repeat. You can look it up. But it's not a crucial to the understanding. So that from our purposes, the economy of scale factors is in the range between 0.6 and 100. And so this ...

[AUDIO LOGO] RICHARD DE NEUFVILLE: There's something important about this title. And it is that I'm talking about preferred projects. I'm not talking about best projects. And this is very much on purpose. Basically, when we think about a system, a system which has lots of different performance characteristics, which has numbers of stakeholders who are thinking about it-- there's a financial side, there's a technological side, there's the human relations side, there's environmental sides, et cetera, different criteria for performance-- it is basically conceptually impossible to talk about the best. We may talk about what we think is our preferred choice, what is, in some ways, in our minds, the best. But in terms of an optimization, it's difficult. And I think that we ought to recognize that and use optimization techniques to sort through dominated solutions, a concept I'll come to by the end of the class, but really focus on that we...

[AUDIO LOGO] [MOUSE CLICK] STEVEN JOHNSON: OK, so let's get started. So as I said, I'm going to do second derivatives, which is just going to be the derivative of the derivative. When you have functions from matrices to matrices or something like that, you have to think a little bit carefully just to make sure we understand what kind of thing the second derivative is. So remember when we take basically the first derivative, what we have is this linear operator, f primed of x, that takes in a little change and gives us a df, which is the f of x plus dx minus f of x to first order, dropping higher-order terms. And so it's really natural to define the second derivative as the derivative of that. So what should f double prime be? f double primed of x should take in-- let me call it dx prime. I mean, that's not a derivative. It just means a different-- we put it in here in red. This is going to be a different small change. So prime here is not derivative, it...

[AUDIO LOGO] FRANK SCHILBACH: All right, welcome, everybody. I'm Frank Schilbach. I'm a faculty member at MIT. And I teach behavioral and development economics. In particular, I'm interested in issues related to poverty, in particular, psychological issues, which I'll mostly tell you about next time on Wednesday when we talk about financial strains or people worrying about money, when we talk about sleep deprivation, and in particular, mental health. Today, we're going to talk about behavioral development economics as a field overall. And I'm trying to give you a broad overview. Most of what I'm going to tell you is based on a handbook chapter on behavioral development economics with Michael Kremer and Gautam Rao. So what's the plan? I'll give you a broad overview. And we'll kind of discuss a little bit what is behavioral development economics, a little bit of the history and how to think about this, and some caveats. Then we'll...