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Overreaction to Fearsome Risks

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  • Zeckhauser, Richard

    (Harvard University)

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.

Suggested Citation

  • Zeckhauser, Richard, 2008. "Overreaction to Fearsome Risks," Working Paper Series rwp08-079, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp08-079
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    File URL: https://research.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=6152&type=WPN
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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, March.
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    Cited by:

    1. Toman Michael, 2014. "The need for multiple types of information to inform climate change assessment," Journal of Benefit-Cost Analysis, De Gruyter, vol. 5(3), pages 469-485, December.
    2. Antony Millner & Hélène Ollivier, 2016. "Beliefs, Politics, and Environmental Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 226-244.
    3. Tim Krieger, 2011. "9/11's Legacy: How Abstract Fear and Collective Memory Lead to Real Economic Costs," Working Papers CIE 45, Paderborn University, CIE Center for International Economics.
    4. Evan Herrnstadt & Richard L. Sweeney, 2017. "What Lies Beneath: Pipeline Awareness and Aversion," NBER Working Papers 23858, National Bureau of Economic Research, Inc.
    5. Chanel, Olivier & Chichilnisky, Graciela, 2013. "Valuing life: Experimental evidence using sensitivity to rare events," Ecological Economics, Elsevier, vol. 85(C), pages 198-205.
    6. Kogure, Katsuo & Takasaki, Yoshito, 2015. "Conflict, Institutions, and Economic Behavior: Legacies of the Cambodian Genocide," CEI Working Paper Series 2014-13, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    7. Friehe, Tim & Langlais, Eric, 2015. "On the political economy of public safety investments," International Review of Law and Economics, Elsevier, vol. 41(C), pages 7-16.
    8. Kevin Boyle & Sapna Kaul & Ali Hashemi & Xiaoshu Li, 2015. "Applicability of benefit transfers for evaluation of homeland security counterterrorism measures," Chapters,in: Benefit–Cost Analyses for Security Policies, chapter 10, pages 225-253 Edward Elgar Publishing.
    9. Kousky, Carolyn & Rostapshova, Olga & Toman, Michael & Zeckhauser, Richard, 2009. "Responding to Threats of Climate Change Mega-Catastrophes," Discussion Papers dp-09-45, Resources For the Future.
    10. Chollete, Loran & Jaffee, Dwight, 2009. "Economic Implications of Extreme and Rare Events," UiS Working Papers in Economics and Finance 2009/32, University of Stavanger.
    11. Liu, Shuang & Aurambout, Jean-Philippe & Villalta, Oscar & Edwards, Jacqueline & De Barro, Paul & Kriticos, Darren J. & Cook, David C., 2015. "A structured war-gaming framework for managing extreme risks," Ecological Economics, Elsevier, vol. 116(C), pages 369-377.
    12. James K. Hammitt, 2013. "Positive versus Normative Justifications for Benefit-Cost Analysis: Implications for Interpretation and Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 199-218, July.
    13. Kent Daniel & Tobias J. Moskowitz, 2014. "Momentum Crashes," NBER Working Papers 20439, National Bureau of Economic Research, Inc.
    14. Coe, Norma B. & Skira, Meghan M. & Van Houtven, Courtney Harold, 2015. "Long-term care insurance: Does experience matter?," Journal of Health Economics, Elsevier, vol. 40(C), pages 122-131.
    15. Olivier Chanel & Graciela Chichilnisky, 2009. "The influence of fear in decisions: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 39(3), pages 271-298, December.
    16. Gernot Wagner & Richard Zeckhauser, 2012. "Climate policy: hard problem, soft thinking," Climatic Change, Springer, vol. 110(3), pages 507-521, February.
    17. Krieger, Tim & Meierrieks, Daniel, 2014. "How to deal with international terrorism," Discussion Paper Series 2014-03, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    18. Jacqueline Volkman-Wise, 2015. "Representativeness and managing catastrophe risk," Journal of Risk and Uncertainty, Springer, vol. 51(3), pages 267-290, December.
    19. Green, Kesten C. & Armstrong, J. Scott & Graefe, Andreas, 2015. "Golden rule of forecasting rearticulated: Forecast unto others as you would have them forecast unto you," Journal of Business Research, Elsevier, vol. 68(8), pages 1768-1771.

    More about this item

    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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