Understanding and Managing 21st Century Risks

The broad objective of a grant from the Alfred P. Sloan Foundation to Decision Research and the Wharton Risk Center is to advance research on how individuals perceive risk and make decisions with respect to preparedness for future adverse events.  Many of the risks we are studying have catastrophic consequences such as losses from natural disasters, genocide, climate change, the immigration crisis and recently, the coronavirus pandemic. We seek to understand and overcome the cognitive limitations and biases that serve to obstruct effective protective actions and develop implementable strategies for dealing with major problems facing society today.

The research team is comparing findings from text analysis and psychometric surveys. Web-based experiments examine strategies for motivating individuals to adopt protective measures and make more thoughtful and consistent judgments about protecting human lives. A behavioral risk audit that recognizes decision-making errors and biases will be the basis for developing effective strategies for preventing, mitigating, and responding to 21^st century risks.

Linking the Coronavirus Pandemic with Actions on Climate Change Now

Project Overview

Howard Kunreuther and Paul Slovic

To plan for the next pandemic and address the climate change problem, public sector leaders and other key decision makers would improve their decision making if they do the following:

1. Recognize the cognitive biases that pose obstacles to effective action and decision-making
2. Heed the advice of experts as to the consequences of not taking action before it is too late
3. Design a risk management strategy that is based on the difficulties of overcoming these cognitive obstacles

Using COVID-19 as an example, we propose ways for guiding political and business leaders as well as the general public to implement a risk management strategy to significantly reduce carbon emissions, so as to reduce the adverse impacts of climate change in the coming years.

How Thoughts Influence Flood Insurance Purchases

Project Overview

Howard Kunreuther, Russell Richie and Paul Slovic

In an online experiment that involved 650 participants, each individual writes his or her thoughts as to whether or not they want to purchase flood insurance next year. One group is told they have had flood insurance during the past year and can decide not to buy coverage next year (opt-out). The other group is told they did not have flood insurance during the past year but can purchase it next year (opt-in). Both groups are given identical information on the likelihood of a flood causing damage to their house and the financial loss they would experience if they have a flood that would be covered if they had flood insurance. The research will determine whether there are differences in risk perception and concerns associated with a loss (e.g. fear, worry, anxiety, peace of mind) when individuals are asked whether they are in the opt-out or opt-in conditions with respect to flood insurance.