The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend

44 Pages Posted: 12 Dec 2005

See all articles by W. Kip Viscusi

W. Kip Viscusi

Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

Over 250 respondents - graduate students in law and public policy - assessed the risks of climate change and valued climate-change mitigation policies. Many aspects of their behavior were consistent with rational behavior. For example, respondents successfully estimated distributions of temperature increases in Boston by 2100. The median value of best estimates was 1-3 degrees Fahrenheit. In addition, people with higher risk estimates, whether for temperature or related risks (e.g., hurricane intensities) offered more to avoid warming. Median willingness to pay (WTP) to avoid global warming was $0.50/gallon, and 3% of income. And important scope tests (e.g., respondents paid more for bigger accomplishments) were passed. However, significant behavioral propensities also emerged. For example, accessibility of neutral information on global warming boosted risk estimates. Warming projections correlated with estimates for unrelated risks, such as earthquakes and heart attacks. The implied WTP for avoidance was much greater when asked as a percent of income than as a gas tax, a percent thinking bias. Home team betting showed itself; individuals predicting a Bush victory predicted smaller temperature increases. In the climate-change arena, behavioral decision tendencies are like a fun-house mirror: They magnify some estimates and shrink others, but the contours of rational decision remain recognizable.

Keywords: Economics - Economic and Econometric Theory, Economics - Microeconomics, Environment and Natural Resources, Regulation

Suggested Citation

Viscusi, W. Kip and Zeckhauser, Richard J., The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend (November 2005). KSG Working Paper No. RWP05-062, Harvard Law and Economics Discussion Paper No. 537, Available at SSRN: https://ssrn.com/abstract=832645 or http://dx.doi.org/10.2139/ssrn.832645

W. Kip Viscusi

Vanderbilt University - Law School ( email )

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HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

National Bureau of Economic Research (NBER)

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Vanderbilt University - Department of Economics

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Nashville, TN 37235
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(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Owen Graduate School of Management

401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)

HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States

Richard J. Zeckhauser (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
United States
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National Bureau of Economic Research (NBER) ( email )

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United States
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