Robin Hanson writes:
Humans clearly have trouble thinking about death. This trouble is often invoked to explain behavior like delays in writing wills or buying life insurance, or interest in odd medical and religious beliefs. But the problem is far worse than most people imagine. Fear of death makes us spend fifteen percent of our wealth on medicine, from which we get little or no health benefit, while we neglect things like exercise, which offer large health benefits.
When the salience of death is increased, such as by standing next to a Mortuary, we tend to want to reward heros more and punish prostitutes more. We tend to favor more those who praise our religion and nation and those who criticize others. We become more reluctant to disrespect items like flags or crucifixes. We think we are better drivers, and that others agree with us more. We try harder to divert attention from our less popular features and group identifications. We believe more in the supernatural. People with high self-esteem are mostly immune to these effects.
My take: Bryan Caplan and I have an ongoing debate. He holds the traditional economist’s view that people are usually more rational with more important or more decisive choices. I see important exceptions to this principle. Many critical choices cause people to freeze up, become more dogmatic, distract their attention, or engage in greater self-deception. But I am not as skeptical as Robin is about the benefits of health care expenditures.
Addendum: Try this NBER paper on denial of death.