Overreaction to Fearsome Risks

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: 15

Keywords: Business and Government Policy, Microeconomics, Ethics/Political Philosophy, Law and Legal Institutions, Science¿ Technology and Public Policy

working papers series