Irrational Economist_ Making Decisions in a Dangerous World - Erwann Michel-Kerjan [61]
TABLE 14.1 Willingness to Pay in Dollars for Elimination of Cancer Risk: Harvard Law School Results, 2008
Probability Unemotional description Emotional description
1/100,000 241 (100) 250 (100)
[20] [13]
1/1,000,000 59.21 (25) 211 (200)
[19] [15]
Key: Mean (Median); [Number of subjects].
This study was conducted in two law school venues, the University of Chicago (Sunstein, 2002) and Harvard Law School. At Chicago, the medians were 100 and 25 for the “unemotional description” and 100 and 200 for the “emotional description.” While the sample size was too small to permit firm conclusions, the qualitative results pointed in the hypothesized direction. The emotional description drove out responses to the quantitative difference in the risk.
At Harvard, both as shown in the table and as hypothesized, the valuations for the more emotional description hardly differed even though probabilities differed by a factor of 10. Indeed, median WTP was actually higher for the 1/1,000,000 probability given the emotional description, though far from significantly so. By contrast, for the unemotional description WTP for the 1/100,000 probability was far higher.
It is important to note that the difference in WTP, even for the unemotional description, was far below the 10 to 1 odds ratio; for the ratio of the odds it was roughly 4 to 1. Both hypotheses were therefore supported. First, varying the probability had an effect on WTP that was much less than rational decision theory would predict. (Future research should assess whether even mentioning the word cancer induces sufficient emotion to reduce a ratio of 10 to 1 to one of 4 to 1.) When the cancer was described in affectively gripping terms, people were insensitive to probability variations.4
Implications of the Results
These findings have two implications for overreactions. They suggest, first, that when extremely low-probability risks give rise to dread, they are likely to trigger a larger behavioral response than statistically identical comparisons involving less fearsome possibilities. Here, as in the experiment, there will be a kind of “emotion premium.” The findings further suggest that probability neglect will play a role in the private and public reactions to emotionally gripping dangers, and that many people will focus, much of the time, on the emotionally perceived severity of the outcome, rather than on its likelihood.
In this light, it should not be surprising that our public figures and our cause advocates often describe tragic outcomes. Rarely do we hear them quote probabilities. The latter, even if reasonably large, would have little salience in the public debate.
Emotions beyond fear also may drive probability neglect. Consider outrage, an emotion stirred when low-probability risks are created from the outside, as they are with nuclear waste radiation. A similar risk from radon exposure comes from one’s own basement but generates little outrage. Outrage can overshadow probabilities in much the same way as fear can, reinforcing our finding that emotional activity dampens cognitive activity. A central finding of relevant empirical work is consistent with that stressed here: A large difference in probability had no effect in the “high-outrage” condition, involving nuclear waste, but a significant effect was shown in the “low-outrage” condition, involving radon. People responded the same way to a high-outrage risk of 1 in 100,000 as to a risk of 1 in 1,000,000 (Sandman, Weinstein, and Hallman, 1998). Even when both the statistical risk and the ultimate consequences were identical in the high-outrage (nuclear waste) and low-outrage