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Overreaction to Fearsome RisksCass R. SunsteinHarvard Law School Richard J. ZeckhauserHarvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER) December 3, 2008 Harvard Law School Program on Risk Regulation Research Paper No. 08-17 HKS Working Paper No. RWP08-079 U of Chicago, Public Law Working Paper No. 446 U of Chicago Law & Economics, Olin Working Paper No. 253 Abstract: Fearsome risks are those that stimulate strong emotional responses. Such risks, which usually involve high consequences, tend to have low probabilities, since life today is no longer nasty, brutish and short. In the face of a low-probability fearsome risk, people often exaggerate the benefits of preventive, risk-reducing, or ameliorative measures. In both personal life and politics, the result is damaging overreactions to risks. We offer evidence for the phenomenon of probability neglect, failing to distinguish between high and low-probability risks. Action bias is a likely result.
Number of Pages in PDF File: 16 working papers seriesDate posted: December 24, 2008Suggested CitationContact Information
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