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Risk Management – Managing Risks, not Calculating Them

Author

Listed:
  • Philip Kostov

    (Queen's University Belfast)

  • John Lingard

    (University of Newcastle)

Abstract

The expected utility approach to decision making advocates a probability vision of the world and labels any deviation from it ‘irrational’. This paper reconsiders the rationality argument and argues that calculating risks is not a viable strategy in an uncertain world. Alternative strategies not only can save considerable cognitive and computational resources, but are more ‘rational’ with view to the restricted definition of rationality applied by expected utility theorists. The alternative decision making model of risk management is presented and explained.

Suggested Citation

  • Philip Kostov & John Lingard, 2004. "Risk Management – Managing Risks, not Calculating Them," Risk and Insurance 0409001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpri:0409001
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ri/papers/0409/0409001.pdf
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    References listed on IDEAS

    as
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    8. Kunreuther, Howard & Novemsky, Nathan & Kahneman, Daniel, 2001. "Making Low Probabilities Useful," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 103-120, September.
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