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Overreaction to Fearsome Risks

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  • Cass Sunstein
  • Richard Zeckhauser

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.
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Suggested Citation

  • Cass Sunstein & Richard Zeckhauser, 2011. "Overreaction to Fearsome Risks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(3), pages 435-449, March.
    • Handle: RePEc:kap:enreec:v:48:y:2011:i:3:p:435-449
    DOI: 10.1007/s10640-010-9449-3
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    References listed on IDEAS

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    1. James T. Hamilton & W. Kip Viscusi, 1999. "Calculating Risks?: The Spatial and Political Dimensions of Hazardous Waste Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262082780, April.
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    5. Elster,Jon, 1983. "Explaining Technical Change," Cambridge Books, Cambridge University Press, number 9780521270724, October.
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    More about this item

    Keywords

    Action bias; Availability bias; Biased assessment; Risk regulation; Risk perception; D81; Q51; D61; H4;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H4 - Public Economics - - Publicly Provided Goods

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