Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfield of psychology, they show that emotional reactions to risky situations often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

Risk as Feelings

Early studies of intuitive judgment and decision making conducted with the late Amos Tversky are reviewed in the context of two related concepts: an analysis of accessibility, the ease with which thoughts come to mind; a distinction between effortless intuition and deliberate reasoning. Intuitive thoughts, like percepts, are highly accessible. Determinants and consequences of accessibility help explain the central results of prospect theory, framing effects, the heuristic process of attribute substitution, and the characteristic biases that result from the substitution of nonextensional for extensional attributes. Variations in the accessibility of rules explain the occasional corrections of intuitive judgments. The study of biases is compatible with a view of intuitive thinking and decision making as generally skilled and successful.

https://www2.econ.iastate.edu/tesfatsi/JudgementAndChoice.MappingBoundedRationality.DKahneman2003.pdf

A perspective on judgment and choice: Mapping bounded rationality.

Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at a decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfields of psychology, they show that emotional reactions to risky situations often diverge from cognitive assessments of those risks. When such divergence occurs, emotional reactions often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

Risk as feelings.

Daniel Kahneman received the Nobel Prize in economics sciences in 2002, December 8, Stockholm, Sweden. This article is the edited version of his Nobel Prize lecture. The author comes back to the problems he has studied with the late Amos Tversky and to debates conducting for several decades already. The statement is based on worked out together with Shane Federik the quirkiness of human judgment. Language: ru

Maps of Bounded Rationality: Psychology for Behavioral Economics

A review is presented of the book “Heuristics and Biases: The Psychology of Intuitive Judgment,” edited by Thomas Gilovich, Dale Griffin, and Daniel Kahneman.

Heuristics and Biases: The Psychology of Intuitive Judgment

This paper re-examines the commonly observed inverse relationship between perceived risk and perceived benefit. We propose that this relationship occurs because people rely on affect when judging the risk and benefit of specific hazards. Evidence supporting this proposal is obtained in two experimental studies. Study 1 investigated the inverse relationship between risk and benefit judgments under a time-pressure condition designed to limit the use of analytic thought and enhance the reliance on affect. As expected, the inverse relationship was strengthened when time pressure was introduced. Study 2 tested and confirmed the hypothesis that providing information designed to alter the favorability of one's overall affective evaluation of an item (say nuclear power) would systematically change the risk and benefit judgments for that item. Both studies suggest that people seem prone to using an ‘affect heuristic’ which improves judgmental efficiency by deriving both risk and benefit evaluations from a common source—affective reactions to the stimulus item. Copyright © 2000 John Wiley & Sons, Ltd.

/pdf/the-affect-heuristic-in-judgments-of-risks-and-benefits-25td7vz94r.pdf

The affect heuristic in judgments of risks and benefits

Judgments of risk and judgments of benefit have been found to be inversely related. Activities or technologies that are judged high in risk tend to be judged low in benefit, and vice versa. In the present study, we examine this inverse relationship in detail, using two measures of relationship between risk and benefit. We find that the inverse relationship is robust and indicative of a confounding of risk and benefit in people's minds. This confounding is linked to a person's overall evaluation of an activity or technology. Theoretical and practical implications of this risk-benefit confounding are discussed.

/pdf/a-psychological-study-of-the-inverse-relationship-between-4lrbauempf.pdf

Ali Siddiq Alhakami

Papers

The affect heuristic in judgments of risks and benefits

A Psychological Study of the Inverse Relationship Between Perceived Risk and Perceived Benefit