Risk and the Individual Decision Making Process Robyn S. Wilson, PhD Assistant Professor of Risk Analysis and Decision Science Environmental Social Sciences Lab Sea Grant Climate Network Workshop Communications and Social Science Panel Charleston, SC November 9th, 2009 COLLEGE OF FOOD, AGRICULTURAL, AND ENVIRONMENTAL SCIENCES SCHOOL OF ENVIRONMENT AND NATURAL RESOURCES

Overview How do humans make decisions? What does this tell us about the role of risk in decision making? How are these modes of processing reflected in models of decision making? What does this tell us about how to encourage more informed choices in light of risk and uncertainty?

How do humans make decisions? The human brain has two systems involved in information processing and decision making: –Experiential system –Analytic system

The Dual Processing System

Experiential System Intuitive, fast, instinctual, unconscious Occurs first guiding future processing and judgment Relies on associations developed through experience (heuristics!) Motivates action and narrows down the initial set of options Drives risk perception –Risk = Dreaded x Unknown

Analytic System Slow, effortful, conscious Occurs after the experiential system engages Associated with intellect, logic and reason Allows for a more deliberative consideration of remaining options Drives risk assessment –Risk = Probability x Consequence

The Need for Balance The experiential and analytic systems should work in unison, each depending on the other for guidance. The experiential system engages the decision maker and narrows down the options that must then be considered further using the analytic system.

When things are out of balance… Both potentially catastrophic risks with unknown probabilities of occurrence

Terrorism vs. Climate Change 9/11 created images that incite intense feelings of dread, lack of control, fear, outrage (Sunstein, 2006) –Heightens a reliance on the experiential system –Leads to actions driven by perceived as opposed to assessed risk (use of experiential not analytic system) Climate change has not experienced such an event

Models of Decision Making Both the analytic and experiential modes of decision making are reflected in two main models of decision making –Normative: Economically derived theories and axioms that predict how we should perform under ideal conditions (analytic risk assessment) –Descriptive: Behaviorally derived theories that predict how we actually perform under less than ideal conditions (experiential risk perception)

Models of Decision making Ideal conditions?? –…Perfect information –…No time limitations –…Static weights –…Unlimited processing ability –…Precise processing ability –…Efficient processing ability –…etc.

Descriptive Models Given less-than-ideal conditions, normative models and analytic assessments of risk are great in theory but not reflected in practice Descriptive models demonstrate that individuals satisfice, or make decisions based on values or objectives that are salient at the time, but that do not necessarily lead to the optimal choice Herbert Simon, Nobel Prize (Economics), 1978

Street Calculus By Garry Trudeau

So how do we encourage more informed choices? We can trick the decision maker… –Taking advantage of the experiential system to create fear, outrage, etc. and heighten risk perceptions which often drive decisions when uncertainty is present We can treat the decision maker… –Encouraging a careful balance of the experiential and analytic systems and assisting people in behaving more normatively in their decision making –These are prescriptive models of decision making!

Prescriptive Models They are meant to… –Decompose problems into cognitively manageable parts –Create a balance between analytic and experiential systems –Deliberately incorporate science and values –Carefully construct preferences (which are extremely malleable and inconsistent) to ensure more informed choices

Structured Decision Making Carefully define the problem Consider objectives Identify or analyze potential alternatives Establish the consequences of each alternative with respect to its ability to meet stated objectives Address the tradeoffs that each alternative entails Sometimes… Simplify decisions involving uncertainty Account for risk tolerance Think about future decisions

Questions? Robyn Wilson COLLEGE OF FOOD, AGRICULTURAL, AND ENVIRONMENTAL SCIENCES SCHOOL OF ENVIRONMENT AND NATURAL RESOURCES