Risk and Heuristics

The perception of risk affects how people behave. People tend to simplify the world; to use simple heuristics to help them understand risk and how they should behave in the face of risks. These simple rules affect how much insurance they buy, where they live, how dangerous they believe modern life is. Quoting facts and figures may do little to alter people’s behaviour or the hold of these heuristics. Studying the types of heuristics people have about risk has been a fruitful are of research since the 1970s when Tversky and Kahneman undertook their early studies (e.g. 1974, Judgment under uncertainty, Science, 185, 1124-1131). Amongst the numerous heuristics that have been researched I want to consider just three in this blog – representativeness, availability and anchoring – in the light of environmental risk.

Representativeness refers to people’s ability or tendency to view risk in one area as comparable to risk in another if the two areas, at least to them, resemble each other. Crime, whatever, its complexion may provide a convenient category for people to fear even if the causes of terrorism are different from bag snatching. The classing of both as crimes may connect the different activities as comparable in people’s minds. A previous blog discussed the media hype behind the BP oil spill. Media reports kept comparing the spill to the Exxon Valdez, forming a comparability connection in people’s minds. Both are oil spills, so they must be comparable. A closer examination of the causes and characteristics of each casts some doubt on their comparability. One was tanker spill, the other a massive, destructive blowout; one occurred in a confined water body, the other a dynamic ocean; one was associate with stark images and immediate of dying wildlife, the other with less obvious and visually striking losses of livelihoods. Yet, calling each an oil spill implies similarities in nature and similarities in response. Pointing out differences may do little to make people think that the things are different.

The ongoing floods in Pakistan are another example. Third world floods, again, may be the immediate response of some readers and viewers. The same sort of floods seems to happen every year, somewhere over there, surely by now they should know what to do? Classifying the event as a flood brings with it the risk of comparison with other events in the same class. By comparison the death toll seems small, by comparison the event seems slow, by comparison it happens a long way away. Such comparisons can become a convenient short-hand to explaining or justifying a lack of action or the vigorousness of a response. Classing an event may help to understand it but there is also a danger that we assume that as it is a member of that sort of event, we understand what it should do and how we should behave towards it. At the crudest level, for example, how many people should be dead to make it an important flood, rather than looking at the individuality of each event. Floods are different in causes, consequences and solutions; one size fitting all is as inappropriate for environmental hazards as it is for understanding most things.

The flood example is also an illustration of availability bias. Availability bias refers to the tendency for people to respond to risks more vigorously when examples of that type of risk are readily available to them. Availability may be from individual or community memory, from the media, from their beliefs about the world and any number of other sources. The Pakistan floods are compared to the impact of other floods we call to mind most readily whatever their cause. Similarly, the BP oil spill is contrasted in the media with the Exxon Valdez, as the latter is viewed as a key environmental event and so a sort of benchmark for other events, however inappropriate or appropriate the comparison might be.

On a more personal level, the fact that you may have experience a flood of your home in the last two or three years, may make you more wary of the flood risk and so more likely to purchase insurance or to try to at least as insurance companies using the same bias may raise premiums to match the increased perception of risk in your local area. Statistically, the local flood may not alter the probability of future flooding by much, if at all, but does it feel like that to you as you wade through your sodden possessions?

Anchoring refers to an individual’s or community’s starting point for assessing risk. Usually people start from a particular value that they belie is associated with a particular type of risk or event and then adjust their estimation of the risk (or its seriousness) in the light of further information. The adjustment will, however, always be in relation to that initial starting value. In other words, for the same physical risk or event, two individuals, one with a low initial estimate, the other with a high one, will interpret any further information about the risk or event in the light of their initial starting values. After the event, it is likely that both will have moved from their initial estimates but the person with the initial low value will still have a lower estimation of the risk than the person with the initial high estimation.

Once again the two recent disasters of the BP oil spill and the floods in Pakistan can be interpreted as examples of anchoring. How do you judge the impact of the BP oil spill? Initial estimates by the company and environmental groups varied. BP trying to downplay the incident, some environmental groups proclaiming nightmarish scenarios for the future of the Gulf. As the event has unfolded how have each side changed its rhetoric? BP has slowly admitted the spill was worst than initial thought, at least in terms of the amount of oil released into the ocean. Images of environmental annihilation of the Gulf have not emerged. So do you adjust your assessment of the damage wrought by the oil spill up or down as evidence and opinion have increased? Does it depend on where you started – as a committed environmentalist or as a company supporter? Does it really matter where you start, doesn’t the evidence speak for itself? Evidence is always interpreted so these heuristics are important.

Aid for the floods in Pakistan may have suffered from an anchoring effect. The areal extent of the disaster is huge and the impact and suffering caused by the floods is both massive and real, but the initial death toll seemed minor in comparison to other disasters in recent memory, such as the Haitian earthquake or the Boxing Day tsunami. It may be simplistic but impact and death toll may be related in people’s mind and a low death toll anchors the flood disaster relatively low down in a mental pecking order or recent disasters. Subsequent media coverage, celebrity appeals and governmental and UN urging for aid may be interpreted in the light of this initial anchor point.

As an additional thought, what is your individual anchor point in the ongoing ‘discussions’ about the need to reduce expenditure on public spending to clear public deficits? The debate seems to have moved beyond do we need to? The debate only seems to be how severely do we need to? Accepting the need is as much an anchor as setting an amount. I may be overly cynical but if leaks suggest a 40% cut in the spending of a government department and a review finally recommends only 30%, then you can’t help but feel a little relieved it is lower than you expected. Anchoring is a very strong tool in setting agendas both for environmental issues and for politics in general.