Probability neglect: emotions, worst cases, and law.

• Author: Sunstein, Cass R.

If someone is predisposed to be worried, degrees of unlikeliness seem to provide no comfort, unless one can prove that harm is absolutely impossible, which itself is not possible. (1)

[A]ffect-rich outcomes yield pronounced overweighting of small probabilities.... (2)

On Sept. 11, Americans entered a new and frightening geography, where the continents of safety and danger seemed forever shifted.

Is it safe to fly? Will terrorists wage germ warfare? Where is the line between reasonable precaution and panic? Jittery, uncertain and assuming the worst, many people have answered these questions by forswearing air travel, purchasing gas masks and radiation detectors, placing frantic calls to pediatricians demanding vaccinations against exotic diseases or rushing out to fill prescriptions for Cipro, an antibiotic most experts consider an unnecessary defense against anthrax. (3)

1. RISKS, NUMBERS, AND REGULATION

   Consider the following problems:

   * People live in a community near an abandoned hazardous waste site. The community appears to suffer from an unusually high number of deaths and illnesses. Many members of the community fear that the hazardous waste site is responsible for the problem. Administrative officials attempt to offer reassurance that the likelihood of adverse health effects, as a result of the site, is extremely low. (4) The reassurance is met with skepticism and distrust.

   * An airplane, carrying people from New York to California, has recently crashed. Although the source of the problem is unknown, many people suspect terrorism. In the following weeks, many people who would otherwise fly are taking trains or staying home. Some of those same people acknowledge that the statistical risk is exceedingly small. Nonetheless, they refuse to fly, in part because they do not want to experience the anxiety that would come from flying.

   * An administrative agency is deciding whether to require labels on genetically modified food. According to experts within the agency, genetically modified food, as such, poses insignificant risks to the environment and to human health. But many consumers disagree. Knowledge of genetic modification triggers strong emotions, and the labeling requirement is thought likely to have large effects on consumer choice, notwithstanding expert claims that the danger is trivial.

   How should we understand human behavior in cases of this sort? My principal answer, the thesis of this Essay, is that when intense emotions are engaged, people tend to focus on the adverse outcome, not on its likelihood. That is, they are not closely attuned to the probability that harm will occur. At the individual level, this phenomenon, which I shall call "probability neglect," produces serious difficulties of various sorts, including excessive worry and unjustified behavioral changes. When people neglect probability, they may also treat some risks as if they were nonexistent, even though the likelihood of harm, over a lifetime, is far from trivial. Probability neglect can produce significant problems for law and regulation. As we shall see, regulatory agencies, no less than individuals, may neglect the issue of probability, in a way that can lead to either indifference to real risks or costly expenditures for little or no gain. If agencies are falling victim to probability neglect, they might well be violating relevant law. (5)

   Indeed, we shall see that the idea of probability neglect helps illuminate a number of judicial decisions, which seem implicitly attuned to that idea, and which reveal an implicit behavioral rationality in important pockets of federal administrative law. As we shall also see, an understanding of probability neglect helps show how government can heighten, or dampen, public concern about hazards. Public-spirited political actors, no less than self-interested ones, can exploit probability neglect so as to promote attention to problems that may or may not deserve public concern. It will be helpful to begin, however, with some general background on individual and social judgments about risks.

   1. Cognition

      On the conventional view of rationality, probabilities matter a great deal to reactions to risks. But emotions, as such, are not assessed independently; they are not taken to play a distinctive role. (6) Of course, people might be risk-averse or risk-inclined. For example, it is possible that people will be willing to pay $100 to eliminate a 1/1000 risk of losing $900. But analysts usually believe that variations in probability should matter, so that there would be a serious problem if people were willing to pay both $100 to eliminate a 1/1000 risk of losing $900 and $100 to eliminate a 1/100,000 risk of losing $900. Analysts do not generally ask, or care, whether risk-related dispositions are a product of emotions or something else.

      Of course, it is now generally agreed that in thinking about risks, people rely on certain heuristics and show identifiable biases. (7) Those who emphasize heuristics and biases are often seen as attacking the conventional view of rationality. (8) In a way they are doing just that, but the heuristics-and-biases literature has a highly cognitive focus, designed to establish how people proceed under conditions of uncertainty. The central question is this: When people do not know about the probability associated with some risk, how do they think? It is clear that when people lack statistical information, they rely on certain heuristics, or rules of thumb, which serve to simplify their inquiry. (9) Of these rules of thumb, the "availability heuristic" is probably the most important for purposes of understanding risk-related law. (10) Thus, for example, "a class whose instances are easily retrieved will appear more numerous than a class of equal frequency whose instances are less retrievable." (11) The point very much bears on private and public responses to risks, suggesting, for example, that people will be especially responsive to the dangers of AIDS, crime, earthquakes, and nuclear power plant accidents if examples of these risks are easy to recall. (12)

      This is a point about how familiarity can affect the availability of instances. But salience is important as well. "The impact of seeing a house burning on the subjective probability of such accidents is probably greater than the impact of reading about a fire in the local paper." (13) So, too, recent events will have a greater impact than earlier ones. The point helps explain much risk-related behavior. For example, whether people will buy insurance for natural disasters is greatly affected by recent experiences. (14) If floods have not occurred in the immediate past, people who live on flood plains are far less likely to purchase insurance. (15) In the aftermath of an earthquake, the proportion of people carrying earthquake insurance rises sharply--but it declines steadily from that point, as vivid memories recede. (16) For purposes of law and regulation, the problem is that the availability heuristic can lead to serious errors of fact, in terms of both excessive controls on small risks that are cognitively available and insufficient controls on large risks that are not. (17)

      The cognitive emphasis of the heuristics-and-biases literature can be found as well in prospect theory, a departure from expected utility theory that explains decision under risk. (18) For present purposes, what is most important is that prospect theory offers an explanation for simultaneous gambling and insurance. (19) When given the choice, most people will reject a certain gain of X in favor of a gamble with an expected value below X, if the gamble involves a small probability of riches. At the same time, most people prefer a certain loss of X to a gamble with an expected value less than X, if the gamble involves a small probability of catastrophe. (20) If expected utility theory is taken as normative, then people depart from the normative theory of rationality in giving excessive weight to low-probability outcomes when the stakes are high. Indeed, we might easily see prospect theory as emphasizing a form of probability neglect. But in making these descriptive claims, prospect theory does not specify a special role for emotions. This is not a puzzling oversight, if it counts as an oversight at all. For many purposes, what matters is what people choose, and it is unimportant to know whether their choices depend on cognition or emotion, whatever may be the difference between these two terms.

   2. Emotion

      No one doubts, however, that in many domains, people do not think much about variations in probability and that emotions have a large effect on judgment and decisionmaking. (21) Would a group of randomly selected people pay more to reduce a 1/100,000 risk of getting a gruesome form of cancer than a similar group would pay to reduce a 1/200,000 risk of getting that form of cancer? Would the former group pay twice as much? With some low-probability events, anticipated and actual emotions, triggered by the best-case or worst-case outcome, help to determine choice. Those who buy lottery tickets, for example, often fantasize about the goods associated with a lucky outcome. (22) With respect to risks of harm, many of our ordinary ways of speaking suggest strong emotions: panic, hysteria, terror. People might refuse to fly, for example, not because they are currently frightened, but because they anticipate their own anxiety, and they want to avoid it. It has been suggested that people often decide as they do because they anticipate their own regret. (23) The same is true for fear. Knowing that they will be afraid, people may refuse to travel to Israel or South Africa, even if they would much enjoy seeing those nations and even if they believe, on reflection, that their fear is not entirely rational. Recent evidence is quite specific. (24) It suggests that people greatly neglect significant differences in probability when the outcome...