People are Bad at Cost-Benefit Risk Analysis : The Indicator from Planet Money Life constantly requires us to calculate risk, and we're just not very good at it.

We’re Bad At Calculating Risk

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This past year, we have been constantly assessing risk. First, we were wiping down surfaces. Some people were even cleaning their mail when they brought it inside, like my mom. It's been unclear how safe it was to be inside with other people - even family - or go outside. And then there's the vaccine itself.


Yes. Well, you know, Sally, I got the Johnson & Johnson vaccine, so I have thoughts about this.

HERSHIPS: Yeah. Let us talk J&J vaccine.


HERSHIPS: Last month, news started breaking about these rare blood clots possibly linked to the vaccine. And, Stacey, I think you have something to say about this (laughter).

VANEK SMITH: Well, the news broke the day after I got my Johnson & Johnson vaccine shot. Like, I woke up with a sore arm, but I felt good. Like, my risk of getting COVID is so much lower, and I'm on the right track (laughter). And then I started reading headlines that I was now at risk for deadly blood clots. I was freaked out.

HERSHIPS: And not to dismiss the people who did get those blood clots, but it was just a tiny handful - 28 out of millions who got the J&J shot. Still, after the CDC said they were going to review the J&J shot again, there was this dramatic dip in demand for all the vaccines. And meanwhile, we know that COVID has killed about 600,000 Americans, and that is costing us lives. And it's the thing standing in between us and opening our economy back up.


HERSHIPS: I'm Sally Herships.

VANEK SMITH: And I'm Stacey Vanek Smith. This is THE INDICATOR FROM PLANET MONEY. Today on the show, how we assess risk. Why are we so often more worried about things like dying in shark attacks or getting hit by lightning than things like cancer or COVID?


VANEK SMITH: So, Sally, we recently saw this really cool article in The New York Times. It was about this man, Guido Calabresi. He is a judge and a professor emeritus at Yale Law School. And he used to ask the students this kind of riddle. And this particular one illustrates what we are talking about today, how we humans calculate risk. So, Sally, you actually took this riddle out onto the mean streets of New York.

HERSHIPS: I did, indeed. I followed in his footsteps, and I picked a random New Yorker to stand in as my student, 44-year-old Nicole Keating (ph). And here's what I asked her.

Imagine that an evil god...

...An evil god had offered us an invention. And this invention - it would make all of our lives better. We could get places faster. We could get emergency health care. We could see each other way more easily. And this thing is really affordable. But there was a catch. In order to get this invention, we would have to sacrifice 20,000 people a year. I asked Nicole if she would do it.

NICOLE KEATING: I wouldn't do it because 20,000 lives are more valuable than people as a whole having a better quality of life - of being able to travel.

VANEK SMITH: It turned out that Guido's riddle is really a trick question.

HERSHIPS: Yes, which I told Nicole.

Sorry. OK, so here's the deal. This actually happened. The invention is the automobile.

KEATING: Oh, my gosh. No way. Like, knowing this now, am I still going to get into my car and drive tomorrow (laughter) to take Rucker (ph) to school or to go visit my mom? And I will take that chance.

VANEK SMITH: Every year, 38,000 Americans die in car accidents, but a lot of us get more freaked out and worried about things like getting killed by a shark.

HERSHIPS: By the way, the odds of that are about 1 in 3.5 million.

VANEK SMITH: The way we assess risk is complicated. There are all these different possible reasons that we calculate the odds the way we do, and we often screw it up.

HERSHIPS: But let's not be total downers here.

VANEK SMITH: (Laughter).

HERSHIPS: Sometimes we're actually pretty good at calculating risk because otherwise, human beings would have died out a long time ago.

DAVID SPIEGEL: Well, you know, we're pretty pathetic physical creatures, and the fact that we survived at all has a lot to do with our ability to assess risk.

HERSHIPS: Dr. David Spiegel is a psychiatrist. ***********

HERSHIPS: He is Director of the Center on Stress and Health at Stanford. And he says possible reason number one for the way we assess risk - it is deeply embedded in our brains. The kinds of risks that used to kill us off in prehistoric times were physical threats. We're talking leopards, polar bears, large crocodiles...

VANEK SMITH: So we had to react quickly as a species. And there's this part of our brain called the salience network. And it looks for things that are unfamiliar.

SPIEGEL: Part of what the salience network does is it detects things that are potentially dangerous, especially if they're infrequent - that you are noticing the novelty. And so the system is attuned to overreact to potential threat and do the evaluation of it later.

HERSHIPS: But then things get a little more complicated. I introduce you to a possible reason number two we succeed or fail at assessing risk - the power of our imaginations.

SPIEGEL: The other problem we have is that the more vividly we can perceive a risk, the more likely it seems to us to happen.

VANEK SMITH: Let's take the example of planes versus cars. According to the National Safety Council, in 2019, the odds of an American dying in a plane crash were just too small to calculate. You were more likely to be killed by a dog attack, to be electrocuted, to die of sunstroke than to perish in a plane crash. It is many times more dangerous to drive than to fly in an airplane, but somehow, we're just not really able to make that calculation.

SPIEGEL: You have this fantasy of being in control. When I talk to pilots about it, they say, you know, I'd rather have a problem in an airplane. I've got seven to 10 minutes to fix it. In a car, you might have three seconds.

VANEK SMITH: David says the familiarity of our experience with driving gives us an illusion of safety. So even though being in a car is way, way more dangerous than being on a plane, our imaginations can get in the way of making that calculation. And all of this is why when some of us hear about how more than 8 1/2 million Americans have gotten the Johnson & Johnson vaccine and been totally fine, not gotten COVID but then that there's this tiny number who have gotten these very rare blood clots, we might be inclined to not give Johnson & Johnson's vaccine a fair chance. And that is because we are calculating risk using dramatic examples that stick in our memories. And those tend to be not the ones that are in line with the probabilities in our own lives.

HERSHIPS: And if it makes you feel better, Stacey, this is a human problem. Even neuroscientists can have a hard time with this. Sonia Bishop is a psychologist and a neuroscientist at Berkeley.

Is there a way for us to get better at assessing risk?

SONIA BISHOP: I'm not sure necessarily in general. I think what we can do is to try and avoid biases influencing us. And so those kinds of biases that we can know are, you know, let's try and evaluate the situation when we're in a neutral mood as much as possible because we're most likely to make the best-informed decision, which isn't biased, in that situation.

HERSHIPS: OK, bottom line, this stuff is really complicated. And the reason is because our risk assessment system is a system that is designed to help us humans survive. And, sometimes, it works really well, like if you see a giant grizzly bear charging you, you know, to get out of the way.

SPIEGEL: The capacity to imagine is a two-edged sword. It can help us, you know, figure things out we otherwise couldn't figure out. But it can also help us distort or ignore reality, make ourselves afraid of things that actually are there to help us.

HERSHIPS: The problem is that the feeling of threat doesn't necessarily mean that our assessment of what is threatening is correct. And so before we try to calculate the risk, we should ask ourselves, like, if we are misjudging a threat.

SPIEGEL: We're not going to survive if we're constantly reacting like we're going to get killed every second. You can't do what you need to do to survive. So it's a matter of coming up with a reasonable balance.

HERSHIPS: Like recognizing that COVID is not just a flu and that the vaccine, like any medication, has risks. But if you're doing an objective cost-risk analysis, the vaccine is the best bet to protect you.

VANEK SMITH: Just don't Google anything about the Johnson & Johnson vaccine.

HERSHIPS: (Laughter).

VANEK SMITH: That's my personal, experientially based advice.


VANEK SMITH: This episode of THE INDICATOR was produced by Jamila Huxtable, with engineering by Gilly Moon. It was edited by Kate Concannon. And THE INDICATOR is a production of NPR.

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