Cognitive and social psychologists have uncovered a number of features of ordinary thinking about risk. Giving particular attention to the work of Paul Slovic, this review-essay explores how an understanding of human cognition bears on law and public policy. The basic conclusion is that people make many mistakes in thinking about risk and that sensible policies, and sensible law, will follow statistical evidence, not ordinary people. The discussion explores the use of heuristics, the effects of cascades, the role of emotions, demographic differences, the role of trust, and the possibility that ordinary people have a special “rationality” distinct from that of experts. Because people are prone to error, what matters, most of the time, is actual risk, not perceived risk. In the late 1980s, the Environmental Protection Agency embarked on an ambitious project, designed to compare the views of “the public” and “EPA experts” on the seriousness of environmental problems.1 The project revealed some striking anomalies, for the two groups sharply diverged on some crucial issues. With respect to health risks, the public’s top five concerns included radioactive waste, radiation from nuclear accidents, industrial pollution of waterways, and hazardous waste sites.2 But in the view of EPA experts, not one of these problems deserved a “high” level of concern. Two of the public’s top concerns (nuclear accident radiation and radioactive waste) were not even * Karl N. Llewellyn Distinguished Service Professor, Law School and Department of Political Science, University of Chicago. I am grateful to Daniel Kahneman, Martha Nussbaum, and Richard A. Posner for very helpful comments on a previous draft. 1 Counting on Science At EPA, 249 Science 616 (1990).
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The present report describes an expanded replication of the previous experiments in a nonlaboratory real-play setting unique to the experimental literature on decision processes - a casino in downtown Las Vegas.
This paper describes a psychological phenomenon called psychic numbing that devalues lives when many are at stake and thus enables political leaders to neglect mass suffering, in violation of our professed humanitarian values. The authors argue for the need to use tools such as decision analysis to overcome this moral insensitivity and provide a more thoughtful and consistent framework within which to assess the difficult trade-offs posed by decisions involving mass atrocities.
Perhaps the earliest studies of risk perception with regard to natural hazards were conducted by geographer Gilbert White (1945, 1964) and his students (e.g. Burton and Kates 1964). Later, in 1974, this author joined with White and economist Howard Kunreuther to review this early work in the context of new research in cognitive psychology (Kahneman and Tversky 1972; Tversky and Kahneman 1971, 1973) describing the idiosyncratic ways human minds think about probability, uncertainty and risk (Slovic et al. 1974). This research illustrated the workings of Herbert Simon’s theory of “bounded rationality” (1959), which asserts that human cognitive limitations force decision makers to construct a simplified model of the world in order to deal with it.
The past twenty-five years have seen considerable social science research on the risks of technologies and economic activities, and an even lengthier legacy of studies on natural hazards. This work has generated a substantial knowledge base from which to interpret such issues as the sources and causes of changing risks and the ways in which various groups and different societies assess, view, and cope with those risks. In particular, risk perception researchers have investigated in depth how judgments about perceived risks and their acceptability arise, and how such judgments are related to risk “heuristics” (e.g. the memorability, representativeness, and affective qualities of risk events) and the qualitative characteristics of risk (e.g. voluntariness or catastrophic potential). Patterns of risk perception have also been found to relate to both group and cultural affiliations. Meanwhile, dramatic events such as the Chernobyl disaster, the BSE (“mad cow”) and the genetically modified crops controversies in Europe, the September 11th attacks in the United States, and the prospect of global climate change have driven home to responsible authorities and corporate managers the extensive intertwining of technical risk with social considerations and processes. As Kai Erikson (1994) succinctly puts it, modern disasters present us with a “new species of trouble.”
We employed simple gambles to investigate information processing in relation to the compatibility effect. Subjects should be more likely to engage in a deliberative thinking strategy when completing a pricing task rather than a rating task. We used eye-tracking methodology to measure information acquisition and processing in order to test the above hypothesis as well as to show that losses and alternatives with uncertain outcomes are more likely than gains and alternatives with sure outcomes to be processed through a deliberative thinking process. Results showed that pupil dilations, fixation duration and number of fixations increased when subjects evaluated the gambles with a pricing task. Additionally, the number of fixations increased as the gamble outcome became increasingly negative and when the outcome was uncertain (vs. sure). Fixations were also predictive of subjects’ final evaluations of the gambles. We discuss our results in light of the cognitive processes underlying different response modes in economic preferences.
Fault trees represent problem situations by organizing "things that could go wrong" into functional categories. Such trees are essential devices for analyzing and evaluating the fallibility of complex systems. They follow many different formats, sometimes by design, other times inadvertently. The present study examined the effects of varying three aspects of fault tree structure on the evaluation of a fault tree for the event "a car fails to start." The fault trees studied had four to eight branches, including "battery charge insufficient," "fuel system defective," and "all other problems." Major results were as follows: (a) People were quite insensitive to what had been left out of a fault tree, (b) increasing the amount of detail for the tree as a whole or just for some of its branches produced small effects on perceptions, and (c) the perceived importance of a particular branch was increased by presenting it in pieces (i.e., as two separate component branches). Insensitivity to omissions was found with both college student subjects and experienced garage mechanics. Aside from their relevance for the study of problem solving, such results may have important implications for (a) how best to inform the public about technological risks and to involve it in policy decisions and (b) how experts should perform fault tree analyses of the risks from technological systems.
Financial advisors are continually faced with the challenge of evaluating the quality of financial investments. Previous research has indicated that even among researchers of financial markets, diverse views exist about the meaning of risk and its relationship to returns. A survey study of 265 financial advisors and planners was undertaken to develop a deeper understanding of how financial judgment is related to other characteristics of asset classes, particularly perceptions of their risks, returns and return/risk relationships. Risk-related dimensions included volatility, investment time horizon, performance predictability, knowledge level and overall perceived risk. Return-related dimensions included overall perceived return, return/risk ratio and one & ten year rate of return. The results indicated a strong correlation between perceived risk and return, consistent with finance theory. However, a more complex, curvilinear picture emerged with respect to the relationship between perceived risk and perceived return/risk. The findings suggest that among financial advisors, risk can take on a variety of meanings when the concept is applied to evaluating different asset classes.
Abstract : Previous studies have concluded that when making inferences, people tend to ignore various kinds of normatively important information (e.g., samples sizes, base rates). The basis for such conclusions has typically been the similarity of responses across groups presented with widely discrepant values of that information. The experiments reported here convert earlier, between- subject designs to within-subject formats. Each subject made several judgments as one kind of information varied across a range of possible values. When information regarding base rates and predictive validity was varied, roughly two-thirds of the subjects changed their judgments in directions dictated by normative considerations. There were no appreciable shifts in response to changes in sample size. Apparently, people know (or can figure out) sonewhat more than what they have been given credit for in the past. (Author)
No abstract is provided for this article.
This study is an attempt to understand attitudes, perceptions, and behaviors with respect to nuclear power and several other technological risk sources. A unique feature of the study is a comparison between public views in the United States, where nuclear energy is...
