Are we all conservatives?

September 6, 2007

I haven’t always been enthusiastic about the proliferation of so-called decision biases.

One of my early articles was entitled “Do decision biases explain too much?” I examined the Vincennes shootdown incident (in which a U.S. Aegis cruiser mistakenly shot down a commercial airplane flying from Bandar Abbas airport in Iran to Dubai). The captain was accused of decision bias because he appeared to see what he believed was happening. However, if he had failed to shoot down the airplane and it had in fact been an Iranian warplane that attacked him he would also have been guilty of decision bias – for ignoring base rates. In other words, as long as the captain got a bad outcome he would have been guilty of some sort of decision bias. But if decision bias can explain everything then it explains nothing.

Nevertheless, the judgment and decision making community has generated a number of important phenomena. One of them is loss aversion. Most people won’t take a simple gamble such as flipping a coin unless the amount they can win is about twice what they might lose. Quattrone and Tversky pointed out that this gives incumbent politicians a great advantage. They noted that it also complicates negotiations because each side is much more pained by the concessions they are asked to make than the gains they are about to realize. Kahneman and colleagues showed that subjects set a higher price on an item such as a pen or coffee mug that they would have to sell than the price they would pay to buy it from someone else. We feel losses much more than we feel equivalent gains.

I saw this loss aversion process when I sold my company two years ago. We had carefully calculated that the benefits plan of our new company was almost completely equivalent to the benefits plan we were used to. Yet most employees complained about all the things they were giving up. They felt the losses much more than the gains.

I wonder if the same phenomenon is sometimes at play in political and social decision making. Take the case of global warming. There are several assumptions here – first, that global warming is occurring, second, that a significant portion of it is man-made, and third, that the consequences will be dire for our planet. Most people seem to be convinced of all three.

Let’s look at the third proposition that global warming will have dire consequences. Perhaps if you live in Bangladesh, but not if you live in Canada. Bjorn Lomborg (a notorious global warming skeptic) has written a new book “Cool it,” describing the positive consequences of global warming. He points out all the attention given to the European heat wave of 2003, which killed 3,500 in Paris, and about 35,000 throughout Europe. He contrasts these figures with the 200,000 Europeans who die from cold each year. Further, it seems easier to avoid heat-related deaths than cold-related ones. His argument is that overall we may come out ahead from global warming.

Politically and emotionally, Lomborg will have difficulty persuading us. We can see pictures of icebergs receding so we know what we’re losing. We see the permafrost melting and disappearing forever. We can see evidence of heat related deaths. We can’t see the prevention of cold-related deaths. Even the positive aspect of shipping routes over the north pole seems to be just another occasion for conflict with Russia. No, we feel losses twice as much as gains. That makes us emotionally conservative on issues like this.

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