Dreadful Possibilities, Neglected Probabilities
Introduction (Via Cass Sunstein & Richard Zeckhauser)
Dreadful possibilities stimulate strong emotional responses, such as fear and anxiety. Fortunately, most high-consequence negative events have tiny probabilities, because life is no longer nasty, brutish and short. But when emotions take charge, probabilities get neglected. Consequently, in the face of a fearsome risk, people often exaggerate the benefits of preventive, risk-reducing, or ameliorative measures. In both personal life and politics, the result is harmful overreactions to risks.
One salient manifestation of probability neglect is that in two situations involving the same dreadful possibility, one much more likely to unfold than the other, individuals may value risk elimination nearly equally even though probabilities may differ by a factor of 20 or more. People focus on the bad outcome itself, and are inattentive to how unlikely it is to occur – hence their overreaction when the risk is low.
In other words, those who suffer from probability neglect would give up too much to wipe out a low-probability risk (moving from 0.001 to 0.000). They will frequently take excessive preventive action.
Corporations and governments suffer equivalent fates, in part because they need to respond to individuals and in part because of their own natural tendencies. Patt and Zeckhauser labelled such overreactions as action bias in a 2000 article in the Journal of Risk and Uncertainty. That bias is especially likely if the relevant actors are able to obtain credit from themselves or the public for responding to the risk.