Article

Action Bias and Environmental Decisions

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Abstract

Individuals have a penchant for action, often for good reasons. But action bias arises if that penchant is carried over to areas where those reasons do not apply, hence is nonrational. Action bias is explored theoretically, and then empirically, using data from surveys of hypothetical environmental decisions. Quite apart from agency considerations, individuals like to affect outcomes when gains are reaped. Given the ability to help one of two sites, we find that decision makers choose to foster improvement rather than prevent deterioration, despite framing that makes it arbitrary which site is improved, which preserved. Strong action bias--individuals choosing to reap gains even though they must impose losses--is also observed. These concepts are related to loss aversion, status quo bias, omission bias for losses, and bright-line behavior. Copyright 2000 by Kluwer Academic Publishers

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... A higher propensity for taking risk on the first choice is also consistent with the idea of a so-called action bias. This term refers to a tendency to do something rather than doing nothing, which may lead to more risky choices (e.g., Bar-Eli, Azar, Ritov, Keidar-Levin, & Schein, 2007;Patt & Zeckhauser, 2000). Experiments 3A and 3B were conducted to test the idea of an action bias by introducing free cards. ...
... In the previous two experiments, we could show that participants took a further card more frequently on their first choices. Unfortunately, in addition to the probability hypothesis, the finding is also consistent with the tendency to do something rather than doing nothing, that is, with a so-called action bias (e.g., Bar-Eli et al., 2007;Patt & Zeckhauser, 2000). Action bias as well as following conditional probabilities at trial start, predict a high tendency to take another card. ...
... When participants started at a later state (e.g., five open gain cards), their propensity to turn a card was higher as compared with when they arrived at the same state from an earlier one. Critically, though, participants' tendency to take more risks on the initial choice might also be an indication of a so-called action bias (e.g., Bar-Eli et al., 2007;Patt & Zeckhauser, 2000), that is, the tendency to take action rather than doing nothing. ...
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Article
In this study, we examined participants' choice behavior in a sequential risk‐taking task. We were especially interested in the extent to which participants focus on the immediate next choice or consider the entire choice sequence. To do so, we inspected whether decisions were either based on conditional probabilities (e.g., being successful on the immediate next trial) or on conjunctive probabilities (of being successful several times in a row). The results of five experiments with a simplified nine‐card Columbia Card Task and a CPT‐model analysis show that participants' choice behavior can be described best by a mixture of the two probability types. Specifically, for their first choice, the participants relied on conditional probabilities, whereas subsequent choices were based on conjunctive probabilities. This strategy occurred across different start conditions in which more or less cards were already presented face up. Consequently, the proportion of risky choices was substantially higher when participants started from a state with some cards facing up, compared with when they arrived at that state starting from the very beginning. The results, alternative accounts, and implications are discussed.
... This notion of regret aversion has been termed as convexity of the anticipated net advantage function in regret theory by Loomes and Sugden (1982) , and has played a crucial role in explaining lottery-choice observations that are not in line with standard expected utility theory. Intuitively, it means that people generally prefer risking small regrets rather than risking large ones (Patt and Zeckhauser, 2000 ). Regarding health promotion, regret for wasting money is less essential compared to regret for having a health problem due to lack of effort. ...
... Intuitively, this notion of regret aversion reflects the fact that people generally prefer risking small regrets rather than risking large ones (Patt and Zeckhauser, 2000 ). We illustrate this with the example shown in Table 1 . ...
Article
In this paper, we study the willingness to pay for reductions in health risks within a framework of anticipated regret. We show that ex post information provision can be a relevant factor for regret theory to account for why people are sometimes so inclined to protect themself against certain types of health risks but not others. In particular, we find that under full resolution of uncertainty disproportionate aversion to large regrets exaggerates willingness to pay estimates. The effect induced by this notion of regret aversion can be interpreted as if regret-averse people overweight risk reductions due to prevention. However, as feedback over forgone acts is missing, the regret aversion effect disappears. Finally, we show that information avoidance induced by regret aversion can significantly bias our evaluation to prefer those health programs that completely eliminate a risk, i.e., the certainty effect.
... The OCEAN questions lead to feedback about the player's personality. The skills taught in eQuoo are as follows: emotional bids [63], generalization [64], action bias [65], confirmation bias [65], catastrophizing [66], halo effect [67], reciprocity [68], expectancy effect [69], courtesy bias [70], and self-serving bias [71]. Details of each skill and instance of personality feedback can be read in a library feature within the app. ...
... The OCEAN questions lead to feedback about the player's personality. The skills taught in eQuoo are as follows: emotional bids [63], generalization [64], action bias [65], confirmation bias [65], catastrophizing [66], halo effect [67], reciprocity [68], expectancy effect [69], courtesy bias [70], and self-serving bias [71]. Details of each skill and instance of personality feedback can be read in a library feature within the app. ...
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Article
Forty percent of all general-practitioner appointments are related to mental illness, although less than 35% of individuals have access to therapy and psychological care, indicating a pressing need for accessible and affordable therapy tools. The ubiquity of smartphones offers a delivery platform for such tools. Previous research suggests that gamification-turning intervention content into a game format-could increase engagement with prevention and early-stage mobile interventions. This study aimed to explore the effects of a gamified mobile mental health intervention on improvements in resilience, in comparison with active and inactive control conditions. Differences between conditions on changes in personal growth, anxiety and psychological wellbeing, as well as differences in attrition rates, were also assessed. The eQuoo app was developed and published on all leading mobile platforms. The app educates users about psychological concepts including emotional bids, generalization, and reciprocity through psychoeducation, storytelling, and gamification. In total, 358 participants completed in a 5-week, 3-armed (eQuoo, "treatment as usual" cognitive behavioral therapy journal app, no-intervention waitlist) randomized controlled trial. Relevant scales were administered to all participants on days 1, 17, and 35. Repeated-measures ANOVA revealed statistically significant increases in resilience in the test group compared with both control groups over 5 weeks. The app also significantly increased personal growth, positive relations with others, and anxiety. With 90% adherence, eQuoo retained 21% more participants than the control or waitlist groups. Intervention delivered via eQuoo significantly raised mental well-being and decreased self-reported anxiety while enhancing adherence in comparison with the control conditions. Mobile apps using gamification can be a valuable and effective platform for well-being and mental health interventions and may enhance motivation and reduce attrition. Future research should measure eQuoo's effect on anxiety with a more sensitive tool and examine the impact of eQuoo on a clinical population.
... Our results also indicate that accounting for unobserved utility associated with the management alternatives as well as the panel structure of the design decreases influence of the status quo on choice. Previous research has shown respondents prefer taking management action over the non-action captured in the status quo (Patt and Zeckhauser, 2000). Patt and Zeckhauser (2000) call this action bias, which can be seen as the opposite of status quo bias. ...
... Previous research has shown respondents prefer taking management action over the non-action captured in the status quo (Patt and Zeckhauser, 2000). Patt and Zeckhauser (2000) call this action bias, which can be seen as the opposite of status quo bias. We find that respondents who had visited undeveloped upland in the past were less likely to pick the status quo. ...
Article
Anthropogenic climate change poses a significant threat to Texas’ coastal habitats and in the Galveston Bay region, there is just under 1200 square miles of freshwater marsh and undeveloped dry upland. These habitats provide residents with a variety of key ecosystem services but are threatened by global climate change. Effective management of these resources requires multidisciplinary knowledge, combining an understanding of the potential biophysical habitat alterations associated with sea level rise with the measurement of residents’ value for coastal resources. In this study, we utilize a discrete choice experiment to investigate individuals’ preferences for future conditions of Texas habitats within the Galveston Bay region. Utilizing modeled output for coverage of freshwater marsh and undeveloped dry upland in the year 2050, respondents are asked to make trade-offs between coastal conditions with no further management actions and outcomes associated with specific management interventions. From this framework, we estimate Galveston Bay regional residents’ value for freshwater marshes and undeveloped uplands. Our results indicate that individuals are willing to conserve habitat under threat from sea level rise, but that they are likely unaware of the dynamic nature of that change. As a result, residents may place less emphasis on the role of the habitat migration in response to sea level rise.
... While executing untested actions can compromise future goals, taking action is necessary to prevent endangering future goals. Given that people often show action bias in decision-making (Patt & Zeckhauser, 2000), one could speculate that people focusing on opportunities will be more willing to actively prevent the negative 9 consequences of bad performance rather than procrastinate. Realizing a discrepancy between the current state and their goals could motivate people to change their behavior (e.g., begin searching for solutions more quickly or putting more effort into finding solutions), enabling better adaptive performance. ...
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Preprint
According to meta-analytic evidence, people who perceive more opportunities in their occupational future often report better well-being and motivation. A positive correlation with performance was also reported, but only a few performance facets were examined extensively, such as task and contextual performance. Furthermore, performance was usually assessed via self-reports in previous studies, which leads to validity concerns (e.g., overestimation of own performance). The present study (N = 258) helps close these research gaps by examining the relationship with a different performance facet and assessing performance subjectively and objectively (task scores). Specifically, the present study investigated whether focusing on occupational opportunities helps people adapt to changes (adaptive performance). While focus on opportunities was related to self-reported adaptive performance, there was no substantial evidence that focus on opportunities promotes adaptive performance (transition adaption and reacquisition adaption) on a specific task. Present findings indicate that it is important to distinguish between subjective and objective performance measures when investigating potential outcomes of focus on opportunities. Due to the limitations of subjective performance measures, such as the threat of overestimating own performance, it is recommended that future studies examining the relationship with performance facets also include objective measures. Since previous research is almost exclusively based on subjective performance measures, it is currently unclear whether focus on opportunities is of practical relevance in the performance context.
... Hence, not only a lack of interest in and or understanding of climate change, but also cognitive phenomena, like the status quo bias (e.g. [72], [73]), could restrain us from giving "climate action the high priority it is due" [2, p. 3]. Similarly to previous work (e.g. ...
Preprint
Despite overwhelming scientific consensus concerning the threatening impact of climate change, public understanding on the topic seems to lack depth. Data visualizations play a critical role in both communicating scientific evidence about climate change and in stimulating engagement and action. To investigate how visualizations can be better utilized to communicate the complexities of climate change to different audiences, we conducted interviews with 17 experts in the fields of climate change, data visualization, and science communication, as well as with 6 members of the broader citizenry. We use our findings to derive implications and recommendations for creating more effective visualizations, particularly in news media sources geared toward lay audiences. Implications include the establishment of an iterative, user-centered co-design process, the adaption of contents according to the needs of the audience, and the integration of information and formats which users can relate to. We further discuss the role of storytelling, aesthetics, uncertainty representation, and interactive techniques in the visual communication of climate change.
... In addition to leaping impulsively to action, some managers tend to rely on favored actions that they have used effectively in the past and are comfortable prescribing because of their familiarity and prior usefulness (Patt and Zeckhauser, 2000). This seems more rewarding to action-oriented people than spending time investigating the complexity of an evolving issue and then identifying goals, objectives, and actions accordingly. ...
... People have an impulse towards action to gain a sense of control over chaotic situations, including cyber intrusions. Researchers have named this error in judgment action bias (Patt & Zeckhauser, 2000). Despite frameworks and playbooks which encourage preparation, measured response appears surprisingly uncommon compared with contemporary efforts focused only on prevention (Stevens et al., 2022). ...
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Conference Paper
The hours and days immediately following the discovery of a cyber intrusion can be stressful and chaotic for victims. Without a documented and well-rehearsed incident response plan, people are prone to costly fear-based reactions. Action bias is the human tendency to favor action over inaction. It feels better for victims to do something even if rushed decisions are suboptimal to thoughtful, careful alternatives. Furthermore, the null baseline of doing nothing or watchful waiting can sometimes be advantageous. This paper describes an application of opportunity cost to action bias. While these insights are not yet backed by empirical data, this is the first work to examine the intersection of opportunity cost with action bias in cybersecurity incident response. Using Sony Pictures Entertainment as a case study, we discuss the implications of opportunity costs from acting prematurely and, conversely, the opportunity costs of waiting to act.
... Decision-makers may have various reasons to adjust system output, such as overcoming algorithm aversion (Dietvorst, Simmons, and Massey 2015), increasing decisionmaking autonomy (Bakker and Demerouti 2017), responding to incentives and preferences (Scheele, Thonemann, and Slikker 2018;Özer, Zheng, and Ren 2014), or simply demonstrating active engagement with forecasting tasks to supervisors (Fildes et al. 2009;Patt and Zeckhauser 2000). However, decision-makers themselves indicate they pursue accuracy (Fildes et al. 2009). ...
Preprint
Predictive Maintenance (PdM) solutions assist decision-makers by predicting equipment health and scheduling maintenance actions, but their implementation in industry remains problematic. Specifically, prior research repeatedly indicates that decision-makers often refuse to adopt the data-driven, system-generated advice in their working procedures. In this paper, we address these acceptance issues by studying how PdM implementation changes the nature of decision-makers’ work and how these changes affect their acceptance of PdM systems. We build on the human-centric Smith-Carayon Work System model to synthesise literature from research areas where system acceptance has been explored in more detail. Consequently, we expand the maintenance literature by investigating the human-, task-, and organisational characteristics of PdM implementation. Following the literature review, we distil ten propositions regarding decision-making behaviour in PdM settings. Next, we verify each proposition’s relevance through in-depth interviews with experts from both academia and industry. Based on the propositions and interviews, we identify four factors that facilitate PdM adoption: trust between decision-maker and model (maker), control in the decision-making process, availability of sufficient cognitive resources, and proper organisational allocation of decision-making. Our results contribute to a fundamental understanding of acceptance behaviour in a PdM context and provide recommendations to increase the effectiveness of PdM implementations.
... Sometimes people have an impulse to act in order to gain a sense of control over a situation and eliminate a problem. This has been termed the Action bias (Patt & Zeckhauser, 2000). ...
Article
Entrepreneurship Development Programs have received a lot of socio-political thrust in India especially of late. This is not unexpected for a country which that is entering its maturity, in terms of economic stature; where entrepreneurship is one of the primary means of attaining nationwide financial and social growth for all sectors of society. The current article proposes to understand whether India as a nation has reached equilibrium or is still in a state of flux, when it comes to choosing a career between entrepreneurship and job-seeking. The study also looks into the underlying forces and policy implications for sustained progress in Indian Entrepreneurial scenario. The article first looks to validate the claim that there is a need for advocacy of entrepreneurship. Subsequently, it uses the notions of irrationality and behavioural economics to suggest more effective and sustainable policy framework, by explaining entrepreneurship as a process such as the Transtheoretical Model.
... Auch wenn es angesichts des menschlichen Action Bias, also der Neigung zum Handeln, selbst wenn das erkennbar nutzlos oder gar schädlich ist (Patt und Zeckhauser 2000), kontraintuitiv erscheinen mag: Eine breite öffentliche Diskussion bietet die bestmögliche Gewähr dafür, dass unter der andauernden Bedingung großer Unsicherheit die in schneller Folge gewonnenen neuen Erkenntnisse bei der Lösungsfindung berücksichtigt werden können. Im Trolley-Dilemma sind alle Einflussfaktoren per definitionem gegeben. ...
... In modern civilized societies it is often more sensible, in the event of imminent threat, to first find out exactly how a situation works, instead of acting directly. Our evolutionary imprinting nevertheless still urges us to act immediately, now known as the Action bias (Baron and Ritov, 2004;Patt and Zeckhauser, 2000). People have also had an evolutionary interest in belonging to well-functioning groups (Tooby and Cosmides, 2005) that are in many ways stronger than the individual. ...
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Chapter
Cognitive biases are systematic cognitive dispositions or inclinations in human thinking and reasoning that often do not comply with the tenets of logic, probability reasoning, and plausibility. These intuitive and subconscious tendencies are at the basis of human judgment, decision making, and the resulting behavior. Psychological frameworks consider biases as resulting from the use of (inappropriate) cognitive heuristics that people apply to deal with data-limitations, from information processing limitations, or from a lack of expertise. Neuro-evolutionary frameworks provide a more profound explanation of biases as originating from the inherent design characteristics of our brain as a neural network that was primarily developed to perform basic physical, perceptual and motor functions, and which also had to promote the survival of our hunter-gatherer ancestors.
... Most (92%) of the subjects thought that George, who acted, felt more regret than Paul, who did not act. Many other studies replicate the different emotional reaction to outcomes depending on whether they result from action or inaction (e.g., Landman, 1987;Ritov and Baron, 1990, 1995Kordes-de Vaal, 1996;Patt and Zeckhauser, 2000;Kruger, Wirtz, and Miller, 2005). The literature includes various terms that denote this phenomenon, such as emotional amplification, the inaction effect, the omission bias, the action bias, the action effect, and the actor effect (see Anderson, 2003, for a review of this literature). ...
Article
The article uses an experiment to address two issues. The first issue is the impact of a strategy's past outcomes on managers' willingness to change it, when these outcomes are irrelevant. The literature suggests that bad outcomes that result from abnormal actions cause more regret than similar outcomes that follow normal actions. In addition, a prior bad outcome makes changes more normal whereas a prior good outcome makes changes less normal. This leads to the hypothesis that following past success of a strategy, the manager will be more inclined to retain it. Surprisingly, this hypothesis is not supported by the data: information about the strategy's past outcome does not affect how likely it is to be continued. The second issue addressed is how managerial strategic decisions are affected by risk. While risk aversion is often assumed for individuals, the usual assumption is that firms (and therefore their managers) maximize expected profits, which imply risk neutrality. The experiment, however, found managerial tendency towards safer strategies – strategies with less variability in outcomes. Thus, the results are inconsistent with the common assumption in economics and management, which suggests that managers (as agents for the firm) are risk neutral.
... Especially in uncertain situations, people often have a desire to act, even though the knowledge basis for rational decision-making is rather small. Patt and Zeckhauser (2000) termed this impulse to act action bias. Sometimes, rational behavior can be to do nothing and to wait until new information has resolved part of the uncertainty, but people's self-perception as an actor or decision-maker who has control over uncertainty can urge them to do something. ...
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Preprint
There is growing awareness within the economics profession of the important role narratives play in the economy. Even though empirical approaches that try to quantify economic narratives are getting increasingly popular, there is no theory or even a universally accepted definition of economic narratives underlying this research. First, we review and categorize the economic literature concerned with narratives and work out the different paradigms that are at play. Only a subset of the literature considers narratives to be active drivers of economic activity. In order to solidify the foundation of narrative economics, we propose a definition of collective economic narratives, isolating five important characteristics. We argue that, for a narrative to be economically relevant, it must be a sense-making story that emerges in a social context and suggests action to a social group. We also systematize how a collective economic narrative differs from a topic and from other kinds of narratives that are likely to have less impact on the economy. With regard to the popular use of topic modeling as an empirical strategy, we suggest that the complementary use of other canonical methods from the natural language processing toolkit and the development of new methods is inevitable to go beyond identifying topics and be able to move towards true empirical narrative economics.
... Alternatively, even though heavy pen pressure did not lead to any significant change in perceived guilt and regret, the effortful action behind heavy pen pressure might be another reason explaining why the participants in this study mostly picked the apology letter with heavy pen pressure. Compared with inaction, taking action is more preferred when handling problems, even though both approaches lead to similar outcomes (Bar-Eli et al., 2007;Patt & Zeckhauser, 2000;Zeelenberg et al., 2002). For example, goalkeepers are expected to be proactive (i.e., jumping to the left or right) in saving a penalty kick even though their choice of action does not increase their chances of saving a goal (Bar-Eli et al., 2007). ...
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Article
Apart from word contents, can emotion in an apology letter also be intensified by tactile perception? This study tried to investigate how word contents and pen pressure, as felt by touching the marks left on the paper, affect people’s perceptions of the feelings of guilt, shame, regret, and sincerity in an apology letter. Eighty undergraduate participants took part in the study, which utilized a 2 (emotional vs neutral contents) × 2 (heavy vs light pen pressure) factorial design. The findings showed that emotional word contents significantly elevated the degrees of all the emotional attributes, whereas heavy pen pressure only led to a significant increase in the shame rating. In addition, only the guilt and regret ratings significantly contributed to the sincerity rating, which was positively correlated to the likelihood of being forgiven. Heavy pen pressure was suggested to be a transformed aggressive reaction to shame, which explained its exclusive effect on the shame rating, whereas the non-significant predictive power of shame in relation to sincerity was probably a result of its self-focused orientation, which showed a less constructive approach to remediation. Yet, in the two-alternative forced choice (2AFC) design adopted in this study, the apology letters written with heavy pen pressure were chosen more than those written with light pen pressure; this was probably due to the seriousness of the attitude indicated by the writing strength. It is suggested that future studies further explore the role of graphology (e.g., typefaces and fonts) on people’s emotional judgements.
... In this view, the same heuristics that optimized the chances of survival of our ancestors in their (natural) environment can lead to maladaptive (biased) behavior when they are used in our current (artificial) settings. Biases that have been considered as examples of this kind of mismatch are the Action bias (preferring action even when there is no rational justification to do this, Baron and Ritov, 2004;Patt and Zeckhauser, 2000), Social proof (the tendency to mirror or copy the actions and opinions of others, Cialdini, 1984), the Tragedy of the commons (prioritizing personal interests over the common good of the community, Hardin, 1968), and the Ingroup bias (favoring one's own group above that of others, Taylor and Doria, 1981). ...
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Article
AI is one of the most debated subjects of today and there seems little common understanding concerning the differences and similarities of human intelligence and artificial intelligence. Discussions on many relevant topics, such as trustworthiness, explainability, and ethics are characterized by implicit anthropocentric and anthropomorphistic conceptions and, for instance, the pursuit of human-like intelligence as the golden standard for Artificial Intelligence. In order to provide more agreement and to substantiate possible future research objectives, this paper presents three notions on the similarities and differences between human- and artificial intelligence: 1) the fundamental constraints of human (and artificial) intelligence, 2) human intelligence as one of many possible forms of general intelligence, and 3) the high potential impact of multiple (integrated) forms of narrow-hybrid AI applications. For the time being, AI systems will have fundamentally different cognitive qualities and abilities than biological systems. For this reason, a most prominent issue is how we can use (and “collaborate” with) these systems as effectively as possible? For what tasks and under what conditions, decisions are safe to leave to AI and when is human judgment required? How can we capitalize on the specific strengths of human- and artificial intelligence? How to deploy AI systems effectively to complement and compensate for the inherent constraints of human cognition (and vice versa)? Should we pursue the development of AI “partners” with human (-level) intelligence or should we focus more at supplementing human limitations? In order to answer these questions, humans working with AI systems in the workplace or in policy making have to develop an adequate mental model of the underlying ‘psychological’ mechanisms of AI. So, in order to obtain well-functioning human-AI systems, Intelligence Awareness in humans should be addressed more vigorously. For this purpose a first framework for educational content is proposed.
... Note: Experiential futures scenario by Leah Zaidi Other biases that influence decision making include herd behaviour (see Banerjee 1992), action bias (see Patt and Zeckhauser 2000), or tunnel vision (Kahneman 2011). Table 3.4 gives an overview of flaws in cognitive processing and their influence in innovative problem solving. ...
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Technical Report
Today's challenges-such as automation, climate change, ageing populations, pandemics, and deployment of artificial intelligence-have unpredictable and unintended consequences at both global and individual levels. Complex systems have become the norm rather than the exception. In this environment, "reactive" approaches to policy making have increasingly proven ineffective. Waiting until a crisis has struck to start imagining a way out of it can be far most costly (in both human and financial terms) than anticipating and preparing for the crisis before it occurs. As the health crisis due to the spread of COVID-19 has clearly demonstrated, we need to invest in anticipation. To bridge this gap, governments need a new approach to policymaking that enables them to effectively address complex problems and uncertainty with new tools and instruments. This approach should be future-oriented, but also involve an action-oriented, innovation function based on anticipation. Despite the fact that foresight tools are increasingly integrated into policymaking, governments often lack a practical understanding of how to anticipate uncertain futures but also how to act on them today to achieve desired outcomes. This paper introduces the concept of anticipation and discusses the emerging practice around anticipatory innovation governance as a broad-based capacity governments can use to spur on innovations (defined as novel to the context, implemented and value shifting products, services and processes) connected to uncertain futures in the hopes of shaping the former through the innovative practice. This makes it different from traditional anticipation approaches: the aim is to not only create knowledge about what might happen, but also shape and prepare for it through innovation. This paper provides an initial overview of anticipatory innovation governance within the context of academic and policy discussions on the future of policymaking. It discusses how such an approach turns the policymaking process on its head. Rather than policy determining the activities of individuals and groups within a system, individual experiments contribute to shaping policy and its effectiveness. This is done by outlining the parameters around which policymakers wish to make change and then by conducting one or more series of experiments testing and iterating on these parameters continuously with individuals or groups that would be affected and in a real world setting. As a result, governments are able to move towards their ideal future not by simply anticipating potential outcomes and developing innovative policy approaches to address them, but by taking action to ensure that these policy approaches work. This paper builds on an extensive literature review on complexity and policymaking and OECD work in the area of policy innovation, system thinking, anticipation, emerging technology and foresight. The paper also draws on the discussion with experts from national governments and international organisations conducted by the Observatory of Public Sector Innovation.
... Auch wenn es angesichts des menschlichen Action Bias, also der Neigung zum Handeln, selbst wenn das erkennbar nutzlos oder gar schädlich ist (Patt und Zeckhauser 2000), kontraintuitiv erscheinen mag: Eine breite öffentliche Diskussion bietet die bestmögliche Gewähr dafür, dass unter der andauernden Bedingung großer Unsicherheit die in schneller Folge gewonnenen neuen Erkenntnisse bei der Lösungsfindung berücksichtigt werden können. Im Trolley-Dilemma sind alle Einflussfaktoren per definitionem gegeben. ...
Full-text available
Article
Zusammenfassung Die Maßnahmen gegen die Covid-19-Pandemie sind einschneidend. Begründet und gerechtfertigt werden sie mit einem ethischen Argument: dem Schutz des menschlichen Lebens. Doch während konkrete Maßnahmen Gegenstand intensiver Auseinandersetzungen sind, fehlen Betrachtungen des Diskurses aus der Metaperspektive. Dieser Artikel leistet dazu einen ersten Beitrag. Er zeigt auf, dass die vorherrschende Argumentationsstruktur die einer Güterabwägung ist. Dabei wird jedoch der Tatsache, dass die Maßnahmen zur Verhinderung der Infektionsausbreitung nicht nur schützen, sondern selbst Todesfälle verursachen, nicht genügend Rechnung getragen. Unter Rückgriff auf das Trolley-Dilemma sowie das Bundesverfassungsgerichtsurteil zum Luftsicherheitsgesetz wird gezeigt, dass die Corona-Pandemie die Politik vor die Wahl stellt, entweder das Sterben von Menschen nicht zu verhindern, oder aber andere Menschen zu diesem Zweck zu opfern. Letzteres ist ethisch bedenklich und verfassungswidrig. Daraus folgt, dass einige der verfügten Maßnahmen zur Eindämmung der Pandemie in Frage zu stellen sind. Daraus folgt jedoch nicht, dass jedes Handeln unmoralisch wäre. Daher schließt der Artikel mit Überlegungen zu Möglichkeiten und Grenzen einer politischen Reaktion auf die Pandemie.
... Lebih lanjut, individu telah terbukti lebih suka upaya mereka menghasilkan hasil yang konkret. Satu studi menemukan individu lebih menyukai proyek lingkungan yang menghasilkan perbaikan atau restorasi yang terlihat, dibandingkan yang hanya mempertahankan status quo (Patt & Zeckhauser, 2000). ...
... This research mainly centers upon how systematic cognitive biases in human decision-making (Kahneman, 2011;Kahneman et al., 1982) inform anomalies in the behavior of individuals and collectivities. Biases that were found to generate overreaction include, among others, the availability bias (Lichtenstein et al., 1978), the affective bias (Slovic et al., 2007;Viscusi and Gayer, 2015), the representativeness heuristic (Kahneman and Tversky, 1973), probability neglect (Sunstein, 2002), action bias (Patt and Zeckhauser, 2000), overconfidence bias (e.g., Lichtenstein et al., 1982), and overconfidence as a social signalling bias, that is as a means of gaining an advantage by appearing more competent than others (e.g., Bénabou and Tirole, 2002). ...
... This research mainly centers upon how systematic cognitive biases in human decision-making (Kahneman, 2011;Kahneman et al., 1982) inform anomalies in the behavior of individuals and collectivities. Biases that were found to generate overreaction include, among others, the availability bias (Lichtenstein et al., 1978), the affective bias (Slovic et al., 2007;Viscusi and Gayer, 2015), the representativeness heuristic (Kahneman and Tversky, 1973), probability neglect (Sunstein, 2002), action bias (Patt and Zeckhauser, 2000), overconfidence bias (e.g., Lichtenstein et al., 1982), and overconfidence as a social signalling bias, that is as a means of gaining an advantage by appearing more competent than others (e.g., Bénabou and Tirole, 2002). ...
Book
Contents: 1. Introduction Capano and Howlett PART 1 – STUDYING PUBLIC POLICY ACTORS & DYNAMICS 2. Public Policy: Definitions & Approaches Howlett and Cashore 3. Studying Policy Dynamics: Policy Cycles and Regimes Perl 4. Mapping Policy Agents: policy entrepreneurs, advocacy coalitions, epistemic communities, instrument constituencies Beland and Haelg PART 2 – STUDYING THE POLICY CONTEXT & PROCESSES 5. Addressing Uncertainty and Ambiguity in policymaking: advancements and dilemmas Nair 6. Making sense of the babble of policy-making: A general framework of the policy process Goyal and Howlett 7. Policy Over- and Underreaction: From Unintentional Error to Deliberate Policy Response Maor PART 3 – STUDYING POLICY MECHANISMS & BEHAVIOUR 8. Studying Public Policy: A Mechanistic Perspective Capano 9. Types of Policy Mechanisms: 1st- and 2nd Order Mechanisms. A case study application Busetti and Capano 10. Understanding Policy Target Behaviour: Compliance Problems & the Limitations of the Utility Paradigm Howlett PART 4 – STUDYING POLICY TOOLS & CAPACITIES 11. Policy Instruments: Definitions & Approaches Howlett 12. Policy Resources, Capacities and Capabilities Wu, Ramesh and Howlett 13. Understanding Complex Policy Mixes: Conceptual and Empirical Challenges Sewerin PART 5 – STUDYING POLICY OUTPUTS & OUTCOMES 14. Policy Design and Non-Design: Discerning the Content of Policy Packaging, Patching, Stretching and Layering Capano and Mukherjee 15. The lessons of policy learning: types, triggers, hindrances and pathologies Dunlop and Radaelli 16. Policy Dismantling, Accumulation & Performance Knill, Steinebach, Adam and Hurka
... Lucas Jr and Taic (2015) say that "rather than focusing on the expected costs and benefits of their behaviour, people sometimes succumb to an irrational penchant for action… [because] in some instances, taking action simply seems normal." They later say that "action bias also manifests itself in situations in which taking action facilitates claiming credit for a good outcome," citing Patt and Zeckhauser (2000) who showed that subjects would rather spend money to clean up a resource than spend the same amount to prevent more pollution in the future. Baron and Ritov (2004) add to this, positing that action bias is likely the over-application of a heuristic biased against passivity and irresponsibility, eluding to the homunculus in our heads shouting "Don't just sit there. ...
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Conference Paper
Much of the research surrounding social influence investigates its effects in specifically non-moral situations while almost no research has looked at its effects during moral emergencies. At the same time, studies of moral psychology tend to focus on the intricacies of moral decision-making during the responses of individual participants. This thesis aims to bridge this gap between social influence and moral psychology by having participants respond to moral dilemmas while under the duress of social influence. In order to investigate the effects of social influence on moral behaviours, immersive virtual reality (IVR) was used, allowing participants to be placed in a life-like virtual simulation of events that they would normally only read about in a text-based vignette, probing their observed moral behaviours instead of just their abstract moral judgments. The benefits of using IVR include the ethical and controllable nature of questionnaires along with the verisimilitude of real-life. Another focus of this thesis is to compare moral judgments to moral behaviours. In two out of the three studies presented in this thesis, the virtual moral dilemma was replicated in a text-based questionnaire in order to compare the results from the two media. Moral judgments in response to text-based moral dilemma can miss out key contextual information such the motoric feedback of having to physically act out a movement. These factors can lead to a divergence between moral judgments and behaviours. The thesis starts with a literature review on IVR technology and moral decision-making and social influence research. After this, the three studies conducted as part of this thesis are described. The major findings from these studies include the demonstration of a preference to take action regardless of outcome only when in IVR and the inability for compliance attempts to influence specifically moral behaviour.
... In modern civilized societies it is often more sensible, in the event of imminent threat, to first find out exactly how a situation works, instead of acting directly. Our evolutionary imprinting nevertheless still urges us to act immediately, now known as the Action bias (Baron and Ritov, 2004;Patt and Zeckhauser, 2000). People have also had an evolutionary interest in belonging to well-functioning groups (Tooby and Cosmides, 2005) that are in many ways stronger than the individual. ...
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Chapter
Cognitive biases are systematic cognitive dispositions or inclinations in human thinking and reasoning that often do not comply with the tenets of logic, probability reasoning, and plausibility. These intuitive and subconscious tendencies are at the basis of human judgment, decision making, and the resulting behavior. Psychological frameworks consider biases as resulting from the use of (inappropriate) cognitive heuristics that people apply to deal with data-limitations, from information processing limitations, or from a lack of expertise. Neuro-evolutionary frameworks provide a more profound explanation of biases as originating from the inherent design characteristics of our brain as a neural network that was primarily developed to perform basic physical, perceptual and motor functions, and which also had to promote the survival of our hunter-gatherer ancestors.
... For instance, many studies have shown that people are often influenced to a greater extent by the pathway through which an outcome occurs (i.e., by action or inaction) rather than by the information about the risks and benefits associated with the outcome (Baron & Ritov, 2004). The action bias describes occasions where an option is preferred because it is perceived as an action, despite it yielding less optimal outcomes than an alternative option of inaction (Bar-Eli, Azar, Ritov, Keidar-Levin, & Schein, 2007;Patt & Zeckhauser, 2000). This preference for action over inaction has been well documented in the decision making tendencies of both patients and physicians (Ayanian & Berwick, 1991;Fagerlin, Zikmund-Fisher, & Ubel, 2005;Kiderman, Ilan, Gur, Bdolah-Abram, & Brezis, 2013;Scherer, Valentine, Patel, Baker, & Fagerlin, 2019). ...
Article
Clinical guidelines recommend that physicians educate patients about illnesses and antibiotics to eliminate inappropriate preferences for antibiotics. We expected that information provision about illnesses and antibiotics would reduce but not eliminate inappropriate preferences for antibiotics and that cognitive biases could explain why some people resist the effect of information provision. In 2 experiments, participants (n₁ = 424; n₂ = 434) either received incomplete information (about the viral etiology of their infection) or complete information (about viral etiology and the ineffectiveness and harms of taking antibiotics), before deciding to rest or take antibiotics. Those in the complete information conditions responded to items on 4 biases: action bias, social norm, source discrediting, and information neglect. In 2 follow-up experiments (n₁ = 150; n₂ = 732), we aimed to counteract the action bias by reframing the perception of the resting option as an action. Complete information provision reduced but did not eliminate inappropriate preferences for antibiotics. Around 10% of people wanted antibiotics even when informed they are harmful and offer no benefit and even when the alternative option (i.e., rest) was framed as an active treatment option. Results suggest an action bias underpins this preference but appears challenging to counteract. (PsycInfo Database Record (c) 2020 APA, all rights reserved).
... In modern civilized societies it is often more sensible, in the event of imminent threat, to first find out exactly how a situation works, instead of acting directly. Our evolutionary imprinting nevertheless still urges us to act immediately, now known as the Action bias (Baron andRitov, 2004, Patt andZeckhauser, 2000). ...
Full-text available
Preprint
Cognitive biases are systematic cognitive dispositions or inclinations in human thinking and reasoning that often do not comply with the tenets of logic, probability reasoning, and plausibility. These intuitive and subconscious tendencies are at the basis of human judgment, decision making, and the resulting behavior. Psychological frameworks consider biases as resulting from the use of (inappropriate) cognitive heuristics that people apply to deal with data-limitations, from information processing limitations, or from a lack of expertise. Neuro-evolutionary frameworks provide a more profound explanation of biases as originating from the inherent design characteristics of our brain as a neural network that was primarily developed to perform basic physical, perceptual and motor functions, and which also had to promote the survival of our hunter-gatherer ancestors.
... For instance, the "demand for security", i.e. the demand for "appropriate" policy measures, is particularly high after a terrorist attack -and governments usually respond to these demands quite willingly. According to Patt and Zeckhauser (2000) and Sunstein and Zeckhauser (2011), an overreaction by the government (the so-called "action bias") is especially likely if the relevant actors will be able to obtain credit for responding to the risk. Not surprisingly, after terrorist attacks the public and policy responses are typically much larger than the actual risk warrants. ...
Full-text available
Chapter
In recent years, a number of major terrorist attacks in EU member states has put the fight against homegrown and international terrorism at the top of the agenda of European policy-makers. This paper analyzes the costs of terrorism in the European Union from both a theoretical and empirical perspective in order to evaluate counter-terrorism policies by comparing their costs and benefits. Two important policy implications can be derived from our exercise. First, individuals’ behavioral predispositions typically result in a biased perception of the risk of terrorism leading to too high a demand for counter-terrorism measures relative to what the objective probability of terrorist events suggests. This results in a tendency to favor repressive over preventive measures against terrorism. Second, uncoordinated European policies against terrorism have the potential to undermine the effectiveness of counter-terrorism measures. If there is a justification for the existence of the European Union (which an increasing number of populist parties in Europe seems to doubt), then it is to provide supranational answers to coordination failure in European counter-terrorism policies.
... he irst stream of research largely comprises psychological explanations identifying a pattern of overreaction thinking which systematically deviates from concepts of rational choice. his research mainly centers on how systematic cognitive biases in human decision-making (Kahneman 2011;Kahneman et al. 1982) inform anomalies in individual and collective behavior (Tversky and Kahneman 1974;Lichtenstein et al. 1978;Slovic 2007;Kahneman and Tversky 1973;Sunstein 2002;Sunstein and Zeckhauser 2010;Lichtenstein et al. 1982;Moore and Healy 2008;Patt and Zeckhauser 2000;Jones and Baumgartner 2005;Baumgartner et al. 2009). Its conceptual structure consists of micro-foundations (e.g., bounded-rationality)-key elements of human cognitive processes-which can thereafter be explicitly linked to collective activities in governments and at other societal level systems. ...
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Article
Policy overreaction is a policy that imposes objective and/or perceived social costs without producing offsetting objective and/or perceived benefits. It is therefore an objective fact and, at the same time, a matter of interpretation. Policy scholars tend to view this duality as a problematic ontological issue and to categorize such policies as errors of commission or omission. This article builds on (i)the aforementioned duality and (ii)a recent conceptual turn whereby this concept is re-entering the policy lexicon as a type of deliberate policy choice. This may be motivated by, among other factors, political executives’ desire to pander to public opinion, appear informed to voters, and signal extremity. The article assigns specific policy overreaction responses to two dimensions: the scale of policy in terms of objective costs and benefits, and public perceptions of policy. The derived policy taxonomy highlights four distinct empirical categories, which are elaborated and exemplified here, as well as a set of hypotheses about differing patterns of politics and governance associated with the design of these policy choices. These distinctions should facilitate a more systematic empirical test of strategic policy overreaction as a risky policy investment.
... Study 2 tests two alternative explanations for people's prevalent decision to sacrifice the passenger in the one-versus-one dilemma presented in Study 1. The first explanation is an action bias, in which people choose action (changing the path of the vehicle) over inaction (staying on the default path) even when the outcome of taking action is irrational 29,30 . The alternative explanation is a status quo bias, according to which decision-makers are more likely to preserve the default state of an outcome over change 11,31 . ...
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Article
The development of artificial intelligence has led researchers to study the ethical principles that should guide machine behavior. The challenge in building machine morality based on people’s moral decisions, however, is accounting for the biases in human moral decision-making. In seven studies, this paper investigates how people’s personal perspectives and decision-making modes affect their decisions in the moral dilemmas faced by autonomous vehicles. Moreover, it determines the variations in people’s moral decisions that can be attributed to the situational factors of the dilemmas. The reported studies demonstrate that people’s moral decisions, regardless of the presented dilemma, are biased by their decision-making mode and personal perspective. Under intuitive moral decisions, participants shift more towards a deontological doctrine by sacrificing the passenger instead of the pedestrian. In addition, once the personal perspective is made salient participants preserve the lives of that perspective, i.e. the passenger shifts towards sacrificing the pedestrian, and vice versa. These biases in people’s moral decisions underline the social challenge in the design of a universal moral code for autonomous vehicles. We discuss the implications of our findings and provide directions for future research.
... A recent study using environmental choice scenarios was able to confirm this assumption, and additionally demonstrated that individuals who endorse sacred values tended to prefer actions to omissions more strongly compared to people who did not endorse sacred values, even though both alternatives result in similar consequences (Tanner, 2009). These findings provided further evidence for the assumption that people who endorse sacred values often strongly favor actions over inactions (i.e., "action bias"; e.g., Patt & Zeckhauser, 2000;Tanner et al., 2008). It should be noted that these findings with regard to the "action bias" obviously contradict the prevailing view that sacred values Introduction 11 are related to an "omission bias", that is, a tendency to prefer omissions to actions (e.g., Ritov & Baron, 1990. ...
Article
This doctoral thesis explores specific intrapersonal processes which decision makers undergo when confronted with choices that tap into moral considerations. More precisely, it addresses the concept of sacred values, which generally refers to issues or entities which individuals deem as inviolable, absolute, and thus precluded from trade-offs against other issues or values. It is argued that sacred values may powerfully shape decision making, and that specific intrapersonal processes operate when issues such as human rights or human dignity are treated as sacred. Moreover, sacred values may have two different effects on decision making, depending on the type of trade-off at hand. In taboo trade-offs (i.e., scenarios that pit a sacred value against a non-sacred issue), sacred values may facilitate decision making. In contrast, in tragic trade-offs (i.e., scenarios that pit two sacred values against each other), sacred values may hinder the choice process. The first of two papers examined the influence of sacred values and manipulation of trade-off type on perceived decision difficulty and negative emotions. The findings of two experiments show that taboo trade-offs were perceived as more negatively emotion-laden, but as easier to solve, compared to scenarios not involving sacred values (i.e., routine trade-offs). However, tragic trade-offs were experienced as particularly difficult and stressful. The second paper explored several indicators of conflict and self-regulation processes. Three experiments assessed measures of ambivalence, emotional stress, fear, and guilt, as a function of sacred value endorsement and trade-off type. The results demonstrate that individuals with higher sacred value endorsement showed more variation in intrapersonal measures depending on trade-off type than people with lower levels, and showed predominantly lower scores in taboo scenarios. Altogether, the results suggest that sacred values may, in fact, play the role of facilitators or barriers in decision making, and that they provoke specific (cognitive and affective) conflict and self-regulation processes. These results are mainly discussed on the background of dual process models and in terms of the functions of negative emotions in decision making when sacred values are called into question. Diese Dissertation untersucht spezifische intrapersonale Prozesse bei Entscheidungsträgern, die mit Szenarien konfrontiert sind, welche moralische Sachverhalte tangieren. Sie thematisiert das Konzept der Geschützten Werte, womit Werte oder Entitäten gemeint sind, die Individuen als unantastbar und absolut ansehen und von Abwägungen gegen andere Werte ausschliessen. Es wird argumentiert, dass Geschützte Werte Entscheidungen massgeblich beeinflussen können, und dass spezifische intrapersonale Prozesse ablaufen, wenn Geschützte Werte wie z.B. Menschenrechte oder die Würde des Menschen von Entscheidungen tangiert sind. Darüber hinaus dürften Geschützte Werte zwei unterschiedliche Effekte auf die Entscheidungsfindung haben, und zwar in Abhängigkeit des vorliegenden Trade-off-Typs. Im Falle eines taboo trade-offs (Szenario, bei dem ein Geschützter Wert gegen einen nicht geschützten Sachverhalt abgewogen werden soll) dürften Geschützte Werte die Entscheidungsfindung erleichtern, im Falle eines tragic trade-offs (Szenario, bei dem zwei Geschützte Werte gegeneinander abgewogen werden sollen) jedoch erschweren. Im ersten von zwei Papers wurde der Einfluss Geschützter Werte und einer Manipulation des Trade-off-Typs auf die wahrgenommene Entscheidungsschwierigkeit und die emotionale Belastung untersucht. Die Ergebnisse zweier Experimente zeigen, dass taboo trade-offs als emotional belastender, aber als einfacher zu lösen erlebt wurden, im Vergleich zu Szenarien, bei deinen keine Geschützten Werte tangiert waren (routine trade-offs). Im Gegensatz dazu wurden tragic trade-offs als besonders schwierig zu lösen und sehr belastend empfunden. Das zweite Paper befasste sich mit verschiedenen Indikatoren von Konflikt- und Selbstregulationsprozessen. In drei Experimenten wurden die erlebte Ambivalenz, die emotionale Belastung, sowie Furcht- und Schuldgefühle in Abhängigkeit der Stärke Geschützter Werte und des Trade-off-Typs gemessen. Die Resultate zeigen, dass Personen mit starken Geschützten Werten grössere Schwankungen der intrapersonalen Indikatoren in Abhängigkeit des Trade-off-Typs aufwiesen als Personen mit weniger starken Geschützten Werten, wobei die Ausprägungen im Falle von taboo trade-offs besonders tief ausfielen. Insgesamt bestätigen die Untersuchungen, dass Geschützte Werte die Rolle von Entscheidungshilfen oder aber Entscheidungshemmern spielen können, und dass sie spezifische (kognitive und affektive) Konflikt- und Selbstregulationsprozesse auslösen. Die Ergebnisse werden hauptsächlich anhand von Zwei-Prozess-Modellen und der Funktion negativer Emotionen bei Entscheidungen, die Geschützte Werte in Frage stellen, diskutiert.
... In our case study, agriculture is the backbone of households' livelihood and they remain faithful to it in their adaptation to most of the possible scenarios of changes described to them. The fact that households are prone to choose adaptation actions reflecting their current activities might indicate the use of heuristics (Patt 2007;Patt and Zeckhauser 2000;Payne et al. 1993). Our results show that in the face of change households are, ceteris paribus, likely to choose investments in livelihood portfolios they are familiar with, as reflected in the significantly negative ASCs of business and combined livelihood alternatives (except A&T). ...
Article
A better understanding of how society anticipates and adapts to future changes is critical to inform impact assessment and to develop timely and well-targeted policies to support adaptation. However, the forward-looking adaptation process remains poorly understood. In this paper we introduce choice experiment as a useful approach to investigate how households prefer to adapt livelihoods ex ante to the economic impact of climate and policy changes. This allows us to frame adaptation decisions within the random utility theory and explicitly quantify the likelihoods of particular adaptation choices given varied attributes of contextual changes and households. We collected data from 162 rural households in three Chinese mountain villages. Overall, households chose primarily to increase efforts in agriculture activities or stick to current livelihood portfolios. The results of a Mixed Logit model indicated that households' choice of agriculture was certain while their adoption of non-agriculture liveliho ods to safeguard the households from future changes. Moreover, several possibilities were evaluated for policy interventions to build adaptive capacity of households and facilitate adaptation. Such measures could, for instance, focus on supporting agricultural inputs, providing access to credit as well as practical skills training.
... For instance, the "demand for security", i.e. the demand for "appropriate" policy measures, is particularly high after a terrorist attack -and governments usually respond to these demands quite willingly. According to Patt and Zeckhauser (2000) and Sunstein and Zeckhauser (2011), an overreaction by the government (the so-called "action bias") is especially likely if the relevant actors will be able to obtain credit for responding to the risk. Not surprisingly, after terrorist attacks the public and policy responses are typically much larger than the actual risk warrants. ...
Full-text available
Conference Paper
In recent years, a number of major terrorist attacks in EU member states has put the fight against homegrown and international terrorism at the top of the agenda of European policy-makers. This paper analyzes the costs of terrorism in the European Union from both a theoretical and empirical perspective in order to evaluate counter-terrorism policies by comparing their costs and benefits. Two important policy implications can be derived from our exercise. First, individuals’ behavioral predispositions typically result in a biased perception of the risk of terrorism leading to too high a demand for counter-terrorism measures relative to what the objective probability of terrorist events suggests. This results in a tendency to favor repressive over preventive measures against terrorism. Second, uncoordinated European policies against terrorism have the potential to undermine the effectiveness of counter-terrorism measures. If there is a justification for the existence of the European Union (which an increasing number of populist parties in Europe seems to doubt), then it is to provide supranational answers to coordination failure in European counter-terrorism policies.
... The first stream of research largely comprises psychological explanations that identify a pattern of overreaction thinking which systematically deviates from concepts of rational choice. This research mainly centers on how systematic cognitive biases in human decision-making (Kahneman 2011;Kahneman et al. 1982) inform anomalies in individual and collective behavior (Tversky and Kahneman 1974;Lichtenstein et al. 1978;Slovic et al. 2007;Kahneman and Tversky 1973;Sunstein 2002;Sunstein and Zeckhauser 2010;Lichtenstein et al. 1982;Moore and Healy 2008;Patt and Zeckhauser 2000;Jones and Baumgartner 2005;Baumgartner et al. 2009). Its conceptual structure consists of microfoundations (e.g., bounded-rationality)-key elements of human cognitive processeswhich can thereafter be explicitly linked to collective activities in governments and at other societal level systems. ...
Full-text available
Research
Policy overreaction is defined as "policy that imposes objective and/or perceived social costs without producing offsetting objective and/or perceived benefits." It is therefore an objective fact and, at the same time, a matter of interpretation. Scholars operating in the strongly normative subfields of policy analysis and evaluation, which place efficient goal attainment center stage, view this duality as a problematic ontological issue, thereby categorizing policies that prioritize policy effectiveness over policy efficiency (e.g., policy success "at all costs") as policy mistakes or errors. Building precisely on the aforementioned duality, this paper assigns specific policy overreaction responses to two empirically distinct categories: namely, the scale of policy in terms of objective costs and benefits and the public perceptions of policy. The derived policy taxonomy highlights four types of overreaction alternatives, which are elaborated and exemplified here, as well as a set of hypotheses about differing patterns of politics and governance associated with the design of these policy choices. These distinctions should facilitate a more systematic empirical test of strategic policy overreaction as risky policy investment.
... In this view, the same heuristics that optimized the chances of survival of our ancestors in their (natural) environment can lead to maladaptive ('biased') behavior when they are used in our current (artificial) settings. Heuristics that have been proposed as examples of this kind of mismatch are the action bias (a penchant for action even when there is no rational justification to deviate from the default option of no-action; Patt and Zeckhauser, 2000;Ashby et al., 2017), loss aversion (the disutility of giving up an object is greater than the utility associated with acquiring it: Kahneman and Tversky, 1984) and the scarcity heuristic (a tendency to attribute greater subjective value to items that are more difficult to acquire or in greater demand: Mittone and Savadori, 2009). While the evolutionary and ecological perspectives both emphasize that bias only occurs when there is a mismatch between heuristics and the situations in which they are applied, they differ in the hypothesized origin of this mismatch: the ecological perspective assumes that adequate heuristics are currently lacking or inappropriately applied for now, while the evolutionary perspective assumes that they are largely genetically determined. ...
Full-text available
Article
Human decision-making shows systematic simplifications and deviations from the tenets of rationality (‘heuristics’) that may lead to suboptimal decisional outcomes (‘cognitive biases’). There are currently three prevailing theoretical perspectives on the origin of heuristics and cognitive biases: a cognitive-psychological, an ecological and an evolutionary perspective. However, these perspectives are mainly descriptive and none of them provides an overall explanatory framework for the underlying mechanisms of cognitive biases. To enhance our understanding of cognitive heuristics and biases we propose a neural network framework for cognitive biases, which explains why our brain systematically tends to default to heuristic (‘Type 1’) decision making. We argue that many cognitive biases arise from intrinsic brain mechanisms that are fundamental for the working of biological neural networks. To substantiate our viewpoint, we discern and explain four basic neural network principles: (1) Association, (2) Compatibility, (3) Retainment, and (4) Focus. These principles are inherent to (all) neural networks which were originally optimized to perform concrete biological, perceptual, and motor functions. They form the basis for our inclinations to associate and combine (unrelated) information, to prioritize information that is compatible with our present state (such as knowledge, opinions, and expectations), to retain given information that sometimes could better be ignored, and to focus on dominant information while ignoring relevant information that is not directly activated. The supposed mechanisms are complementary and not mutually exclusive. For different cognitive biases they may all contribute in varying degrees to distortion of information. The present viewpoint not only complements the earlier three viewpoints, but also provides a unifying and binding framework for many cognitive bias phenomena.
... In this view, the same heuristics that optimized the chances of survival of our ancestors in their (natural) environment can lead to maladaptive ('biased') behavior when they are used in our current (artificial) settings. Heuristics that have been proposed as examples of this kind of mismatch are the action bias (a penchant for action even when there is no rational justification to deviate from the default option of no-action; Patt and Zeckhauser, 2000;Ashby et al., 2017), loss aversion (the disutility of giving up an object is greater than the utility associated with acquiring it: Kahneman and Tversky, 1984) and the scarcity heuristic (a tendency to attribute greater subjective value to items that are more difficult to acquire or in greater demand: Mittone and Savadori, 2009). While the evolutionary and ecological perspectives both emphasize that bias only occurs when there is a mismatch between heuristics and the situations in which they are applied, they differ in the hypothesized origin of this mismatch: the ecological perspective assumes that adequate heuristics are currently lacking or inappropriately applied for now, while the evolutionary perspective assumes that they are largely genetically determined. ...
Preprint
Human decision making shows systematic simplifications and deviations from the tenets of rationality (‘heuristics’) that may lead to suboptimal decisional outcomes (‘cognitive biases’). There are currently three prevailing theoretical perspectives on the origin of heuristics and cognitive biases: a cognitive-psychological, an ecological and an evolutionary perspective. However, these perspectives are mainly descriptive and none of them provides an overall explanatory framework for the underlying mechanisms of cognitive biases.To enhance our understanding of cognitive heuristics and biases we propose a neural network framework for cognitive biases, which explains why our brain systematically tends to default to heuristic (‘Type 1’) decision making. We argue that many cognitive biases arise from intrinsic brain mechanisms that are fundamental for the working of biological neural networks. In order to substantiate our viewpoint, we discern and explain four basic neural network principles: (1) Association, (2) Compatibility (3) Retainment, and (4) Focus. These principles are inherent to (all) neural networks which were originally optimized to perform concrete biological, perceptual, and motor functions. They form the basis for our inclinations to associate and combine (unrelated) information, to prioritize information that is compatible with our present state (such as knowledge, opinions and expectations), to retain given information that sometimes could better be ignored, and to focus on dominant information while ignoring relevant information that is not directly activated. The supposed mechanisms are complementary and not mutually exclusive. For different cognitive biases they may all contribute in varying degrees to distortion of information. The present viewpoint not only complements the earlier three viewpoints, but also provides a unifying and binding framework for many cognitive bias phenomena.
Article
The rapid deployment of semi-autonomous systems (i.e., systems requiring human monitoring such as Uber AVs) poses ethical challenges when these systems face morally-laden situations. We ask how people evaluate morally-laden decisions of humans who monitor these systems in situations of unavoidable harm. We conducted three pre-registered experiments (total N = 1811), using modified trolley moral dilemma scenarios. Our findings suggest that people apply different criteria when judging morality and deserved punishment of regular-car versus AV drivers. Regular-car drivers are judged according to a consequentialist minimizing harm criterion, whereas AV drivers are judged according to whether or not they took action, with a more favorable prior for acting. Integrating judgment and decision-making research with moral psychology, the current research illuminates how the presence versus absence of automation affects moral judgments.
Article
The hours and days immediately following the discovery of a cyber intrusion can be stressful and chaotic for victims. Without a documented and well-rehearsed incident response plan, people are prone to costly fear-based reactions. Action bias is the human tendency to favor action over inaction. It feels better for victims to do something even if rushed decisions are suboptimal to thoughtful, careful alternatives. Furthermore, the null baseline of doing nothing or watchful waiting can sometimes be advantageous. This paper describes an application of opportunity cost to action bias. While these insights are not yet backed by empirical data, this is the first work to examine the intersection of opportunity cost with action bias in cybersecurity incident response. Using Sony Pictures Entertainment as a case study, we discuss the implications of opportunity costs from acting prematurely and, conversely, the opportunity costs of waiting to act.
Article
An inherent aspect of cybersecurity is managing incidents where people expect to see an immediate response. Action bias is our tendency to favor action over inaction because it makes us feel better—even if we have made things worse.
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Faced with a growing sense of urgency to combat climate change, environmental policy is increasingly turning to alternative policy instruments. One method for boosting green behaviour among individuals rooted in applied behavioural economics is loss framing - transforming existing messages so that they emphasise the potential negative consequences of an action or inaction on the environment. This paper provides a systematic review of the existing body of evidence on framing effects in pro-environmental decisions. Based on an analysis of 61 studies captured in 47 distinct papers we find that real behaviour has been largely neglected as an outcome variable, with preference in the literature given to the measurement of self-reporting constructs such as attitudes, willingness to pay and behavioural intentions. In support of the loss aversion hypothesis, loss framing was found to be more or equally effective in all studies examining behaviour and intentions, though gain framing was more successful where the choices taken required lower commitment, namely attitudes. We provide an analysis of other loss framing success factors and draw policy- and research implications.
Chapter
We explore the timing of action as a perspective into bad leadership. The ability to take immediate action is a much-lauded leadership characteristic. The searches of excellence assume that such an action bias delivers success. In this chapter we develop a contrary point of view. We suggest that the kind of harried action conditioned by the demands of the moment and shaped by frequently myopic organizational routines may not result in very good leadership at all, in particular when facing a crisis or meeting a challenge. Hastiness often incurs the costs of action while falling short of the objective. Instead, we suggest that active waiting—a concept supported by examples from military strategy—may constitute temporally reflexive priming for leadership action.
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Consumers’ pursuit of simplicity is gaining traction as a research topic. However, despite an extensive set of studies investigating various facets of simplicity in marketing and related disciplines, knowledge regarding cognitive simplicity remains fragmented. To address this issue, the authors synthesize research findings from diverse literature streams to provide an understanding of simplicity and its relationship with consumers’ cognitive effort as a non‐monetary but crucial cost in the customer journey. This study also introduces value‐facilitating simplification (VFS) as a marketing doctrine that provides firm‐wide guidance for simplifying consumers’ information environments. The authors provide practical VFS examples as well as critical future research avenues before concluding with a discussion of theoretical and practical contributions.
Article
The findings of many behavioral economics studies have led many experts to share the view that the effects of limited rationality can be solved through the proper development of the menu options available to the consumer. The devising of such a menu rests on the shoulders of regulators. However, the question arises as to how regulators themselves, in turn, are limitedly rational, and how much they are motivated to provide an optimal menu of contracts that ensures maximum social welfare, given that designing such a menu is costly. This paper systematizes the main manifestations of limited rationality which can influence decision-making by regulators. An attempt is made to answer two questions: is there a need and possibility to take into account the limited rationality of civil servants in modeling the actions of the regulator and are special practical measures required to correct for the identified effects.
Article
Uncertain genetic information such as variants of uncertain significance (VUS) is often encountered by patients in clinical cancer genetic testing. Although healthcare providers facilitate patient's understanding of VUS‐associated empirical risk and its medical implications, patients’ understanding and perceptions of risk often differ and may be based on subjective evaluations such as their perception of provider's epistemic authority (EA). This study examines the hypothesis that individuals attribute greater EA to genetic counselors (GCs) (compared to gastrointestinal oncologists) and to providers who recommend more active VUS‐related recommendations (compared to inactive). In a factorial experiment, 652 adult participants recruited on Amazon Mechanical Turk were block‐randomized to read one of 10 different types of VUS‐related scenarios in the context of colon cancer (5 recommendation types × 2 provider types). GCs were attributed higher EA than gastrointestinal oncologists (p = <.001). Active recommendations (comprehensive, check back, wrong) were attributed lower EA (M = 3.67, SD = 0.79) compared to the inactive (stand by, disregard) (M = 3.89, SD = 0.67) (p‐value = <.001). The wrong recommendation was attributed lowest EA compared to the four correct recommendations (mean difference = −0.34, −0.45, −0.35, and −0.44, respectively; p = .002), which, when dropped from the analysis, showed no difference between the correct active and inactive recommendations (3.78 vs. 3.89, p = .095). The higher EA attributed to GCs is encouraging and possibly explained by increased public awareness of the genetic counseling profession. The lack of difference in EA attributed to various correct, yet incomplete forms of VUS‐related recommendation indicates that individuals may be unaware of and thus completely rely on providers for complex medical topics like VUS. Communicating VUS‐related uncertainty warrants caution and further research to elucidate best practices and outcomes.
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The choice of enforcement instruments in competition law has become a major debate around the world. In recent years, many competition authorities commentators have argued for a more “mixed” approach in antitrust enforcement, acknowledging that three enforcement instruments—private, administrative and criminal enforcement—are not substitutes to each other, but rather compliments, and should be better coordinated based on the strengths and weaknesses of each mechanism. This chapter address the insights of this issue by incorporating the recent development of behavioral economics and examine to what extent those insights lead to a different optimal mix of enforcement instruments. Behavioral findings can explain the ineffectiveness of some of the existing mechanisms and allow to provide more balanced criteria for determining the optimal mix of instruments in antitrust enforcement. This chapter discusses the optimal mix of enforcement instruments from the perspective of public and private enforcers. The findings of behavioral studies provided a more nuanced criteria when assessing the pros and cons of each instrument, and may be relevant to explain some of the reasons why the enforcement mechanisms become ineffective.
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Based on the sustainable livelihood framework, this paper explores the influence of each form of livelihood capital on the adoption of climate change adaptation strategies by farmers. A stratified random sampling technique was used to select 235 households in Wushen Banner, China, while the boosted regression tree model was used to analyze how different forms of livelihood capital are related to farmers’ choices regarding climate change adaptation strategies. Our results show that most farmers in the study area have adopted adaptation strategies to cope with climate change. The farmers’ livelihood capital plays an important role in their adoption of adaptation strategies. Specifically, natural capital and social capital have a positive impact on farmers’ decisions about climate change adaptation strategies. Human capital and physical capital are inclined to promote farmers’ adoption of climate change adaptation strategies. The results of this study are helpful for improving our understanding of how livelihood capital influences climate change adaptation strategies among farmers, which can provide implications for planning more effective adaptation programs.
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Cambridge Core - Economic Theory - Escaping Paternalism - by Mario J. Rizzo
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Climate change has affected the rate at which glaciers are receding around the globe. Much of the research on glacier loss has focused on its effects on rising sea levels and water supply. However, studies examining the impact of glacier loss on in situ ecosystem services are quite limited. The Mendenhall Glacier in the Tongass National Forest is an easily accessible glacier that receives over 600,000 visitors annually. While the glacier is currently visible from the visitor centre, it is expected to recede out of sight within the next few decades. Using a choice experiment, tourists are surveyed to estimate a willingness to pay value for slowing the rate of glacier recession. Results indicate that tourists are willing to pay, on average, $ 648 per year to reduce the annual rate of glacier loss to 0.15km3 over the next 60 years. Willingness to pay for policies to achieve the outcomes differs based on political preference and environmental organisation membership. Nature-based tourists care about preserving glaciers and disagree about the mechanisms for how to accomplish that objective.
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This article analyzes how the commitment problem in economic regulation, and a solution based on strategic delegation, are affected by the non-standard rationality of agents that participate in the regulatory interaction. As a result, on the one hand, independent regulators are seen as part of a potentially more robust innovative regulatory system, and, on the other hand, their contribution to this system can be based on a wider range of instruments. Second generation commitment mechanisms that take this into account may be a key ingredient of reforms in the regulation of those industries that require a long run perspective.
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We describe a mechanically verified proof of correctness of the floating point multiplication, division, and square root instructions of the AMD-K7 microprocessor. The instructions are implemented in hardware and represented here by register-transfer level specifica-tions, the primitives of which are logical operations on bit vectors. On the other hand, the statements of correctness, derived from IEEE Standard 754, are arithmetic in nature and considerably more ab-stract. Therefore, we begin by developing a theory of bit vectors and their role in floating point representations and rounding. We then present the hardware model and a rigorous proof of its correctness. All of our definitions, lemmas and theorems have been formally encoded in the ACL2 logic, and every step in the proof has been mechanically checked with the ACL2 prover.
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Numerous studies have demonstrated that theoretically equivalent measures of preference, such as choices and prices, can lead to systematically different preference orderings, known as preference reversals. Two major causes of preference reversals are the compatibility effect and the prominence effect. The present studies demonstrate that the combined effects of prominence and compatibility lead to predictable preference reversals in settings where improvements in air quality are compared with improvements in consumer commodities by two methods-willingness to pay for each improvement and choice (For which of the two improvements would you pay more? Which improvement is more valuable to you?). Willingness to pay leads to relatively greater preference for improved commodities; choice leads to relatively greater preference for improved air quality. These results extend the domain of preference reversals and pose a challenge to traditional theories of preference. At the applied level, these findings indicate the need to develop new methods for valuing environmental resources.
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ACL2 is a mechanized mathematical logic intended for use in specifying and proving properties of computing machines. In two independent projects, industrial engineers have collaborated with researchers at Computational Logic, Inc. (CLI), to use ACL2 to model and prove properties of state-of-the-art commercial microprocessors prior to fabrication. In the first project, Motorola, Inc., and CLI collaborated to specify Motorola's complex arithmetic processor (CAP), a single-chip, digital signal processor (DSP) optimized for communications signal processing. Using the specification, we proved the correctness of several CAP microcode programs. The second industrial collaboration involving ACL2 was between Advanced Micro Devices, Inc. (AMD) and CLI. In this work we proved the correctness of the kernel of the floating-point division operation on AMD's first Pentium-class microprocessor, the AMD5 K 86. In this paper, we discuss ACL2 and these industrial applications, with particular attention to the microcode verification work.
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Computer systems under development are routinely modeled by simulators, and formal verification can be integrated into conventional computer system development by reasoning directly about such simulators. Simulators must be extremely fast to be usable in a real development effort. We have crafted a model for a simple processor in the logic of the ACL2 theorem prover that supports both formal analysis and efficient execution, with performance near that of a simulator written in C. We demonstrate our approach using this simple model and indicate how we applied it to our latest microprocessor.
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We present a rigorous mathematical proof of the correctness of the floating point square root instruction of the AMD K5 microprocessor. The instruction is represented as a program in a formal language that was designed for this purpose, based on the K5 microcode and the architecture of its FPU. We prove a statement of its correctness that corresponds directly with the IEEE Standard. We also derive an equivalent formulation, expressed in terms of rational arithmetic, which has been encoded as a formula in the ACL2 logic and mechanically verified with the ACL2 prover. Finally, we describe a microcode modification that was implemented as a result of this analysis in order to ensure the correctness of the instruction.
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amount of fishing effort. The consequence has been the elimination of some substocks, such as herring, cod, ocean perch, salmon, and lake trout. He concluded that an MSY based upon the analysis of the historic statistics of a fishery is not attainable on a sustained basis. Support for Larkin's view is provided by a number of reviews of the history of fisheries (2). Few fisheries exhibit steady abundance (3). It is more appropriate to think of re- sources as managing humans than the con- verse: the larger and the more immediate are prospects for gain, the greater the polit- ical power that is used to facilitate unlim- ited exploitation. The classic illustrations are gold rushes. Where large and immediate gains are in prospect, politicians and gov- ernments tend to ally themselves with spe- cial interest groups in order to facilitate the exploitation. Forests throughout the world have been destroyed by wasteful and short- sighted forestry practices. In many cases, governments eventually subsidize the ex- port of forest products in order to delay the unemployment that results when local tim- ber supplies run out or become uneconomic to harvest and process (4). These practices lead to rapid mining of old-growth forests; they imply that timber supplies must inev- itably decrease in the future. Harvesting of irregular or fluctuating re- sources is subject to a ratchet effect (3):
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Amos Tversky investigated and explained a wide range of phenomena that lead to anomalous human decisions. His two most significant contributions, both written with Daniel Kahneman, are the decision-making heuristics--representativeness, availability, and anchoring--and prospect theory. Tversky's concepts have broadly influenced the social sciences. In economics, they gave rise to the burgeoning field of behavioral economics. This field, skeptical of perfect rationality, emphasizes validation of modeling assumptions, integration of micro-level data on decisions (including experimental evidence), and adoption of lessons from psychology. Tversky's contributions are reviewed, assessed using citation analysis, and placed in historical context. Fertile areas for behavioral economics research are identified. Copyright 1998 by Kluwer Academic Publishers
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Most real decisions, unlike those of economics texts, have a status quo alternative--that is, doing nothing or maintaining one's current or previous decision. A series of decision-making experiments shows that individuals disproportionately stick with the status quo. Data on the selections of health plans and retirement programs by faculty members reveal that the status quo bias is substantial in important real decisions. Economics, psychology, and decision theory provide possible explanations for this bias. Applications are discussed ranging from marketing techniques, to industrial organization, to the advance of science. Copyright 1988 by Kluwer Academic Publishers
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Subjects were asked to evaluate the choice of options leading to known outcomes, or to say how they would feel about a chance outcome, in hypothetical decisions. We independently manipulated the value of the status quo and the assignment of the better or worse outcome to an act or an omission. Acts leading to the worse outcome were always considered worse than omissions leading to the worse outcome. This act-omission difference was reduced or reversed for the better outcome. Most experiments showed an overall bias toward omissions (combining better and worse). Little evidence was found for greater omission bias for losses relative to the status quo than for gains. A bias toward maintaining the status quo itself was found, however, independently of omission bias. Most of the results can be explained by norm theory and by loss aversion, but other possible accounts are inconsistent with the results. (C) 1994 Academic Press, Inc.
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Article
A wine-loving economist we know purchased some nice Bordeaux wines years ago at low prices. The wines have greatly appreciated in value, so that a bottle that cost only $10 when purchased would now fetch $200 at auction. This economist now drinks some of this wine occasionally, but would neither be willing to sell the wine at the auction price nor buy an additional bottle at that price. Thaler (1980) called this pattern—the fact that people often demand much more to give up an object than they would be willing to pay to acquire it—the endowment effect. The example also illustrates what Samuelson and Zeckhauser (1988) call a status quo bias, a preference for the current state that biases the economist against both buying and selling his wine. These anomalies are a manifestation of an asymmetry of value that Kahneman and Tversky (1984) call loss aversion—the disutility of giving up an object is greater that the utility associated with acquiring it. This column documents the evidence supporting endowment effects and status quo biases, and discusses their relation to loss aversion.
Chapter
When people talk about “theorems” and “proofs” most of us either think of the elementary results of high school geometry, e.g., “If two distinct lines intersect, then they intersect in exactly one point,” or famous unsolved problems, such as Goldbach’s question, “Is there an even number greater than 2 that is not the sum of two primes?”.
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Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. In general, the heuristics are quite useful, but sometimes they lead to severe and systematic errors. The subjective assessment of probability resembles the subjective assessment of physical quantities such as distance or size. These judgments are all based on data of limited validity, which are processed according to heuristic rules. However, the reliance on this rule leads to systematic errors in the estimation of distance. This chapter describes three heuristics that are employed in making judgments under uncertainty. The first is representativeness, which is usually employed when people are asked to judge the probability that an object or event belongs to a class or event. The second is the availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development, and the third is adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
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For energy forecasts to be useful in modelling or in policy efforts, the associated uncertainties must be known reliably. We analyse the actual errors in past forecasts o f over 170 energy pro-ducing and consuming sectors o f the US eco-nomy. We find that the often assumed normal distribution fails to model frequency o f extreme outcomes (those lying far from the mean) accur-ately. Triangular distributions perform even worse as they assign zero probability to the outliers. We develop a simple one-parameter model that can be used to estimate a probability distribution for future projections. In addition to energy forecasts, our method can be applied to any field where a history o f forecasting is avail-able.
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Most discussions of the cost of investing in equity mutual funds focus on one component of cost, the expense ratio, and ignore another significant cost, sales loads. As a result, conclusions about the total cost of mutual fund investing have often been incomplete or misleading. This paper analyzes trends in the cost of investing in equity mutual funds from 1980 to 1997 using a measure called "total shareholder cost." This measure includes all major costs of investing in a mutual fund and is comparable to the fee and expense information required by the U.S. Securities and Exchange Commission in the mutual fund prospectus. The paper finds that the average cost of invest- ing in equity mutual funds has dropped by more than one-third since 1980. The paper also finds evidence of economies of scale among equity funds.
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The authors address barriers to resolving environmental disputes. Their chapter builds on a behavioral decision theory perspective on dispute resolution by focusing on the uniqueness of environmental disputes. They provide a useful bridge from the negotiation literature to the area of environmental disputes. More importantly, they point out that although most of the negotiation literature focuses on differences in interests, many environmental disputes are complicated by differences in values. They note a variety of perceptions specific to the environment context, such as the perception of the "sacredness" of issues. The authors conclude by highlighting useful prescriptions for the negotiation of environmental disputes, ones that take into account the uniqueness of the environmental domain. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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According to a simple form of consequentialism, we should base decisions on our judgments about their consequences for achieving our goals. Our goals give us reason to endorse consequentialism as a standard of decision making. Alternative standards invariably lead to consequences that are less good in this sense. Yet some people knowingly follow decision rules that violate consequentialism. For example, they prefer harmful omissions to less harmful acts, they favor the status quo over alternatives they would otherwise judge to be belter, they provide third-party compensation on the basis of the cause of an injury rather than the benefit from the compensation, they ignore deterrent effects in decisions about punishment, and they resist coercive reforms they judge to be beneficial. I suggest that nonconsequentialist principles arise from overgeneralizing rules that are consistent with consequentialism in a limited set of cases. Commitment to such rules is detached from their original purposes. The existence of such nonconsequentialist decision biases has implications for philosophical and experimental methodology, the relation between psychology and public policy, and education.
Article
Subjects are reluctant to vaccinate a (hypothetical) child when the vaccination itself can cause death, even when this is much less likely than death from the disease prevented. This effect is even greater when there is a ‘risk group’ for death (with its overall probability held constant), even though the test for membership in the risk group is unavailable. This effect cannot be explained in terms of a tendency to assume that the child is in the risk group. A risk group for death from the disease has no effect on reluctance to vaccinate. The reluctance is an example of omission bias (Spranca, Minsk & Baron, in press), an overgeneralization of a distinction between commissions and omissions to a case in which it is irrelevant. Likewise, it would ordinarily be prudent to find out whether a child is in a risk group before acting, but in this case it is impossible, so knowledge of the existence of the risk group is irrelevant. The risk-group effect is consistent with Frisch & Baron's (1988) interpretation of ambiguity.
Book
Hazardous wastes often head the public's list of environmental concerns. Exaggerated estimates of cancer epidemics arising from waste sites generate a sense of alarm, but little is known about the real extent of the health threats. In this book James T. Hamilton and W. Kip Viscusi present the first comprehensive analysis of the magnitude of hazardous waste risks and of the efficacy of the Environmental Protection Agency's Superfund program. By matching agency decision data to detailed census information using geographic information systems (GIS) technology, the authors show that most hazardous waste sites do not pose sufficient risk to merit the most stringent cleanup options. Those sites that do pose considerable risk to exposed populations often receive inadequate attention, because government decisions to target cleanups are based more on political factors than on actual risks. The authors propose policy reforms that could significantly reduce cleanup costs without sacrificing the protection of human health. Beyond its analysis of a particular risk policy, the book serves as a general model for comprehensive risk analysis.
Chapter
This talk discusses the use of a particular theorem prover, ACL2, on formal verification projects, particularly in industrial settings. In addition to describing briefly some existing and ongoing applications of ACL2, I'll discuss features relevant to formal verification projects.
Article
This study develops a methodology for measuring the values that individuals place on morbidity risk reductions and applies it to the measurement of the benefits from reducing the risks of contracting chronic bronchitis. The survey methodology involves the use of an iterative computer program that presents respondents with a series of pairwise comparisons which are individually designed to measure respondents' marginal rates of substitution for chronic bronchitis risk reduction. The approach is innovative in that it measures the rates of trade-offs for chronic bronchitis risk reduction in terms of the risk of an automobile accident fatality (risk-risk trade-off), as well as in dollars (risk-dollar trade-off). Since it generates estimates for each individual, it can reveal distributions of benefit measures rather than simply a population mean estimate. The resulting rates of trade-off for chronic bronchitis and auto fatality risks suggest that the risk of a chronic bronchitis case is worth 32% of the comparable risk of death, as measured by the median trade-off rate. When risk reduction for chronic bronchitis is compared to a cost of living increase, the median rate of trade-off is $457,000, whereas the comparison between automobile fatality risk reductions and cost of living increases yielded a median rate of trade-off of $2.29 million. The results across different risk-risk and risk-dollar trade-offs were internally consistent.
Article
The so-called Boyer-Moore Theorem Prover (otherwise known as Nqthm) has been used to perform a variety of verification tasks for two decades. We give an overview of both this system and an interactive enhancement of it, Pc-Nqthm, from a number of perspectives. First, we introduce the logic in which theorems are proved. Then, we briefly describe the two mechanized theorem proving systems. Next, we present a simple but illustrative example in some detail in order to give an impression of how these systems may be used successfully. Finally, we give extremely short descriptions of a large number of applications of these systems, in order to give an idea of the breadth of their uses. This paper is intended as an informal introduction to systems that have been described in detail and similarly summarized in many other books and papers; no new results are reported here. Our intention here is to present Nqthm to a new audience.
Article
The economic theory of the consumer is a combination of positive and normative theories. Since it is based on a rational maximizing model it describes how consumers should choose, but it is alleged to also describe how they do choose. This paper argues that in certain well-defined situations many consumers act in a manner that is inconsistent with economic theory. In these situations economic theory will make systematic errors in predicting behavior. Kanneman and Tversey's prospect theory is proposed as the basis for an alternative descriptive theory. Topics discussed are: undeweighting of opportunity costs, failure to ignore sunk costs, scarch behavior choosing not to choose and regret, and precommitment and self-control.
Article
This article described three heuristics that are employed in making judgements under uncertainty: (i) representativeness, which is usually employed when people are asked to judge the probability that an object or event A belongs to class or process B; (ii) availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development; and (iii) adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available. These heuristics are highly economical and usually effective, but they lead to systematic and predictable errors. A better understanding of these heuristics and of the biases to which they lead could improve judgements and decisions in situations of uncertainty.
Article
A fundamental issue is what steps, if any, countries should take to control greenhouse gas emissions. The economics literature generally suggest that there is no reason to panic and take drastic action now to reduce greenhouse gases. The political economy literature suggested that such action is infeasible because of the serious problems in getting countries to cooperate. This volume argues that the best strategy for addressing climate change over the next decade is to help build institutions that can address climate change in the future. Those institutions include systems established at the nation-state level to measure greenhouse gas emissions, to implement cost-effective approaches for limiting those emissions, and to enforce those approaches. Over time, supervising the achievement of those objectives might evolve so that it would come under the jurisdiction of an international body, although sovereignty issues would have to be addressed. That international body would assess greenhouse gas inventories and review national policies and measures. This study recommends that the developed nations of the world craft an agreement for the next decade that provides a slight emission limitation and allows for a series of case studies. The case studies would allow for the participation of developing countries. The case study approach would take into account the interests of particular countries. For example, the Scandinavian countries, which have already implemented carbon taxes, could continue on that path, perhaps working on harmonization issues. The United States and other countries interested in tradable permits or a hybrid system could use that approach. Other European countries may want to try a combination of regulation and market-based approaches. The case studies suggested in this volume underscore the need to design national institutions. Such national institutions are crucial if novel market-based mechanisms are to be implemented effective
Article
Some methods of constructing nonstandard models work only for particular theories, such as ZFC, or CA + AC (which is second order number theory with the choice scheme). The examples of this which motivated the results of this paper occur in the main theorems of [5], which state that if T is any consistent extension of either ZFC 0 (which is ZFC but with only countable replacement) or CA + AC and if κ and λ are suitably chosen cardinals, then T has a model which is κ -saturated and has the λ -Bolzano-Weierstrass property. (Compare with Theorem 3.5.) Another example is a result from [12] which states that if T is any consistent extension of CA + AC and cf ( λ ) > ℵ 0 , then T has a natural λ -Archimedean model. (Compare with Theorem 3.1 and the comments following it.) Still another example is a result in [6] in which it is shown that if a model of Peano arithmetic is expandable to a model of ZF or of CA, then so is any cofinal extension of . (Compare with Theorem 3.10.) Related types of constructions can also be found in [10] and [11]. A reflection principle will be proved here, allowing these constructions to be extended to models of many other theories, among which are some exceedingly weak theories and also all of their completions.
Article
Earnings provide important information for investment decisions. Thus, executives--who are monitored by investors, directors, customers, and suppliers--acting in self-interest and at times for shareholders, have strong incentives to manage earnings. The authors introduce behavioral thresholds for earnings management. A model shows how thresholds induce specific types of earnings management. Empirical explorations identify earnings management to exceed each of three thresholds: report positive profits, sustain recent performance, and meet analysts' expectations. The positive profits threshold proves predominant. The future performance of firms suspect for boosting earnings just across a threshold is poorer than that of control group firms. Copyright 1999 by University of Chicago Press.
Article
Aside from possible income effects, measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent. Unexpectedly wide variations between these sums, however, have been noted in survey responses to hypothetical options. This paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations. The results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure, which would appear to call into some question various rules of entitlement, damage assessments, and interpretations of indifference curves.
Article
Standard real business cycle models must rely on total factor productivity (TFP) shocks to explain the observed comovement of consumption, investment, and hours worked. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption can generate comovement in the absence of TFP shocks. Intertemporal substitution of goods and leisure induces comovement over the business cycle through heterogeneity in the consumption behavior of employed and unemployed workers. This result owes to two model features introduced to capture important characteristics of U.S. labor market data. First, individual consumption is affected by the number of hours worked: Employed agents consume more on average than the unemployed do. Second, changes in the employment rate, a central factor explaining variation in total hours, affect aggregate consumption. Demand shocks--such as shifts in the marginal efficiency of investment, as well as government spending shocks and news shocks--are shown to generate economic fluctuations consistent with observed business cycles.
Article
After developing a conceptual analysis of consumer valuation of multiple risks, we explore both economic and cognitive hypotheses regarding individual risk-taking. Using a sample of over 1,500 consumers, our study ascertains risk-dollar tradeoffs for the risks associated with using an insecticide and a toilet bowl cleaner. We observe the expected positive valuation of risk reductions and find empirical support for a diminishing in the valuation of risk reduction as the extent of the risk reduction increases. We also find evidence of certainty premiums for the total elimination of one risk, but no strong evidence of additional certainty premiums for the elimination of multiple risks. Strong reference risk effects are evident, as increases in risk were valued much more greatly than were decreases.
Article
The use of contingent valuation (CV) methods for estimating the economic value of environmental improvements and damages has increased significantly. However, doubts exist regarding the validity of the usual willingness to pay CV methods. In this article, we examine the CV approach in light of recent findings from behavioral decision research regarding the constructive nature of human preferences. We argue that a principal source of problems with conventional CV methods is that they impose unrealistic cognitive demands upon respondents. We propose a new CV approach, based on the value-structuring capabilities of multiattribute utility theory and decision analysis, and discuss its advantages and disadvantages. Copyright 1993 by Kluwer Academic Publishers
Article
We studied how evaluation of changes in low-probability risks are affected by reference points and framing effects. Subjects considered hypothetical situations with one or two low-probability risks. Different frames were used to describe changes in risk levels. In the first experiment, subjects chose between risk-reduction options that achieved the same overall risk reduction: large reduction of one risk vs. equal (smaller) reduction of two risks. When the risks were described as losses relative to the no-risk ideal, more subjects were indifferent between the options than when the same options were described as gains relative to the status quo. In the latter case subjects preferred equal reduction of both risks, unless one risk could be reduced to zero. In a related experiment, subjects were less willing to pay any price for a commodity that carried small increases in two risks than for a commodity carrying a comparable large increase in one risk. In other experiments, subjects evaluated single changes in risks rather than comparing or evaluating pairs of changes. Subjects again placed particularly high value on reducing any risks to zero, and they were even more inclined to do so when some other risk would also be reduced to zero. In a final experiment, elimination of risk was found to be less highly valued if its source was not fully eliminated, and a status-quo effect was found. The findings are interpreted in terms of reference theories of choice.
Article
Bias toward the status quo, found in choice and in emotional reactions to adverse outcomes, has been confounded with bias toward omission. The authors unconfounded these effects with scenarios in which change occurs unless action is taken. Subjects reacted more strongly to adverse outcomes caused by action, whether the status quo was maintained or not, and subjects preferred inaction over action even when inaction was associated with change. No status-quo bias was found in a matching task, which did not require action. The observed status-quo bias is at least partly caused by a bias toward omissions. Copyright 1992 by Kluwer Academic Publishers
Article
Analysis of decision making under risk has been dominated by expected utility theory, which generally accounts for people's actions. Presents a critique of expected utility theory as a descriptive model of decision making under risk, and argues that common forms of utility theory are not adequate, and proposes an alternative theory of choice under risk called prospect theory. In expected utility theory, utilities of outcomes are weighted by their probabilities. Considers results of responses to various hypothetical decision situations under risk and shows results that violate the tenets of expected utility theory. People overweight outcomes considered certain, relative to outcomes that are merely probable, a situation called the "certainty effect." This effect contributes to risk aversion in choices involving sure gains, and to risk seeking in choices involving sure losses. In choices where gains are replaced by losses, the pattern is called the "reflection effect." People discard components shared by all prospects under consideration, a tendency called the "isolation effect." Also shows that in choice situations, preferences may be altered by different representations of probabilities. Develops an alternative theory of individual decision making under risk, called prospect theory, developed for simple prospects with monetary outcomes and stated probabilities, in which value is given to gains and losses (i.e., changes in wealth or welfare) rather than to final assets, and probabilities are replaced by decision weights. The theory has two phases. The editing phase organizes and reformulates the options to simplify later evaluation and choice. The edited prospects are evaluated and the highest value prospect chosen. Discusses and models this theory, and offers directions for extending prospect theory are offered. (TNM)
Article
Investors are keenly interested in financial reports of earnings because earnings provide important information for investment decisions. Thus, executives who are monitored by investors and directors face strong incentives to manage earnings. We introduce consideration of behavioural/institutional thresholds for earnings in this mix of incentives and governance. A model illustrates how thresholds induce specific types of earnings management. Empirical explorations find clear support for earnings management to exceed each of the three thresholds that we consider: positive profits, sustain-recent-performance, and meet-market-expectations. The thresholds are hierarchically ranked. The future performance of firms that possibly boost earnings to just cross a threshold appears to be poorer than that of less suspect control groups.
Article
ACL2 is a reimplemented extended version of R.S. Boyer and J.S. Moore's (1979; 1988) Nqthm and M. Kaufmann's (1988) Pc-Nqthm, intended for large scale verification projects. The paper deals primarily with how we scaled up Nqthm's logic to an industrial strength” programming language-namely, a large applicative subset of Common Lisp-while preserving the use of total functions within the logic. This makes it possible to run formal models efficiently while keeping the logic simple. We enumerate many other important features of ACL2 and we briefly summarize two industrial applications: a model of the Motorola CAP digital signal processing chip and the proof of the correctness of the kernel of the floating point division algorithm on the AMD5<sub>K </sub>86 microprocessor by Advanced Micro Devices, Inc
Article
We report on the successful application of a mechanical theorem prover to the problem of verifying the division microcode program used on the AMD5<sub>K</sub>86 microprocessor. The division algorithm is an iterative shift and subtract type. It was implemented using floating point microcode instructions. As a consequence, the floating quotient digits have data dependent precision. This breaks the constraints of conventional SRT division theory. Hence, an important question was whether the algorithm still provided perfectly rounded results at 24, 53, or 64 bits. The mechanically checked proof of this assertion is the central topic of the paper. The proof was constructed in three steps. First, the divide microcode was translated into a formal intermediate language. Then, a manually created proof was transliterated into a series of formal assertions in the ACL2 dialect. After many expansions and modifications to the original proof, the theorem prover certified the assertion that the quotient will always be correctly rounded to the target precision
Article
We describe a mechanically checked correctness proof for the comparator sort algorithm underlying a microcode program in a commercially designed digital signal processing chip. The abstract algorithm uses an unlimited number of systolic comparator modules to sort a stream of data. In addition to proving that the algorithm produces an ordered permutation of its input, we prove two theorems that are important to verifying the microcode implementation. These theorems describe how positive and negative "infinities" can be streamed into the array of comparators to achieve certain effects. Interesting generalizations are necessary in order to prove these theorems inductively. The mechanical proofs were carried out with the ACL2 theorem prover. We find these proofs both mathematically interesting and illustrative of the kind of mathematics that must be done to verify software. 1 Informal Discussion of the Problem It is often necessary to perform statistical filtering and peak location in dig...
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Psychological studies establish that people are usually overconfident and that they systematically overweight some types of information while underweighting others. How overconfidence affects a financial market depends on who in the market is overconfident and on how information is distributed. This paper examines markets in which price-taking traders, a strategic-trading insider, and risk-averse market-makers are overconfident. It also analyzes the effects of overconfidence when information is costly. In all scenarios, overconfidence increases expected trading volume and market depth while lowering the expected utility of those who are overconfident. However, its effect on volatility and price quality depend on who is overconfident. Overconfident traders can cause markets to underreact to the information of rational traders. Markets also underreact to abstract, statistical, or highly relevant information, while they overreact to salient, anecdotal, or less relevant information.
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The ACL2 logic is a first-order, essentially quantifier-free logic of total recursive functions providing mathematical induction and several extension principles, including symbol package definition, recursive function definition, and encapsulation. In this document we describe the logic more precisely. THIS IS AN INCOMPLETE WORKING DRAFT. 1 Background Naively speaking, a mathematical logic is given by a formal language, some axioms in that language, and some rules of inference that permit one to derive new formulas, called "theorems," from those axioms. To "prove" a theorem one shows how to derive it from the axioms using the rules of inference. This game is very challenging. Even for very simple sets of axioms and rules, the resulting theorems are often non-obvious. What prevents logic from being merely an academic game is that, like most of mathematics, it can be related to our ordinary experience. In particular, it is often possible to give meaning to the formulas in such a way th...
Breaking the Vicious Circle: Toward Effecti?e Risk Regulation
  • Ž Breyer
  • Stephen Degeorge
  • Jayendu Francois
  • Richard Patel
  • Zeckhauser
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Judgment under Uncertainty: Heuristics and Biases,’’ Science 185, 1124?1131 ‘‘An Investigation of the Rationality of Consumer Valuations of Multiple Health Risks
  • Ž Tversky
  • Daniel Amos
  • Kahneman
  • W Viscusi
  • Wesley Kip
  • Joel Magat
  • Huber
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Non-standard analysis in ACL2, in preparation See also R. Gamboa's Ph.D. dissertation at URL http
  • R Gamboa
  • M Kaufmann
Gamboa, R. and Kaufmann, M.: Non-standard analysis in ACL2, in preparation. See also R. Gamboa's Ph.D. dissertation at URL http://www.lim.com/˜ruben/research/thesis/ web/index.html.