Overreaction to fearsome risks

In a recent paper, Cass Sunstein (with Dick Zeckhauser) writes:

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.

Put that man in charge of economic policy, I say.  Hat tip goes to Peter Klein.  Here is Peter's post on the economics of Stonehenge.


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