Risk and resource allocation Ed

Risk and resource allocation

Ed Lotterman explains how our minds are biased in a way that make it hard for us to think clearly about risk may increase risk of premature death: "Real World Economics: Mad cows and irrational humans".

In this entertaining column from the Twin Cities Pioneer Press Lotterman points out that we are likely to accept riskier situations if we feel there is an element of control, and we are likely to underestimate risks in familiar situations and overestimate them in unfamiliar situations. He shows how these may produce personal and public-policy responses to risk that create increased risks. Mad cow disease is unfamiliar, and we can't really feel any control in coping with the risk.

"One response to the BSE scare may be implementation of a national system to identify and track individual cows over their entire lives. Such a system might cost up to $1 billion or so to set up and another $100 million to $300 million to operate each year. Ask the average citizen if it is a good idea to spend $3 per capita right now and another $1 per capita per year afterward for a measure that might reduce the risk of mad cow disease. The vote will be overwhelmingly in favor.

Ask health economists and epidemiologists to list the 10 best ways to reduce premature death or improve health with the same amount of resources, and I am quite sure that reducing BSE via a cow tracking system won't appear on many such lists."