Risk As Analysis and Risk As Feelings: Some Thoughts About Affect, Reason, Risk, and Rationality
Favorite quote: “Studies have demonstrated that analytic reasoning cannot be effective unless it is guided by emotion and affect. Rational decision making requires proper integration of both modes of thought.”
Introduction (via SSRN)
Modern theories in cognitive psychology and neuroscience indicate that there are two fundamental ways in which human beings comprehend risk. The analytic system uses algorithms and normative rules, such as probability calculus, formal logic, and risk assessment. It is relatively slow, effortful, and requires conscious control. The experiential system is intuitive, fast, mostly automatic, and not very accessible to conscious awareness. The experiential system enabled human beings to survive during their long period of evolution and remains today the most natural and most common way to respond to risk. It relies on images and associations, linked by experience to emotion and affect (a feeling that something is good or bad). This system represents risk as a feeling that tells us whether it’s safe to walk down this dark street or drink this strange-smelling water. Proponents of formal risk analysis tend to view affective responses to risk as irrational. Current wisdom disputes this view. The rational and the experiential systems operate in parallel and each seems to depend on the other for guidance. Studies have demonstrated that analytic reasoning cannot be effective unless it is guided by emotion and affect. Rational decision making requires proper integration of both modes of thought. Both systems have their advantages, biases, and limitations. Now that we are beginning to understand the complex interplay between emotion and reason that is essential to rational behavior, the challenge before us is to think creatively about what this means for managing risk. On the one hand, how do we apply reason to temper the strong emotions engendered by some risk events? On the other hand, how do we infuse needed “doses of feeling” into circumstances where lack of experience may otherwise leave us too “coldly rational”? This article addresses these important questions.