Kaplan on Resource Allocation
Funds to help mitigate a natural disaster such as a hurricane, or to try to prevent a terrorist attack, are often distributed through a method known as proportional allocation. A formula is devised that appropriates money according to population, so that in the case of terrorism, Wyoming might receive the same per person amount as New York. As Edward H. Kaplan, William N. and Marie A. Beach Professor of Management Sciences, explains, this approach is both simple and generally perceived as fair. “Why should a citizen in Wyoming feel less safe than a citizen in New York?” he said.
But a perception of safety doesn’t necessarily equal actual safety. Kaplan’s research has shown that when concerning matters of terrorism, proportional allocation can increase risk, as it spreads resources too thin, allowing the nation’s adversaries to hit vulnerabilities harder and inflict greater casualties. Instead, he advocates allocating resources to minimize the maximum damage that could result from any attack, which would plug gaps in coverage that could lead to disastrous results.