Risk as feelings thesis

Risk as feelings thesis

Stanford economist George Loewenstein on how the brain makes decisions and something called the Risk as Feelings thesis:

He argued we overreact emotionally to new risks (which are often low-probability events), and underreact to those risks that are familiar (although these events are more likely to occur). So, as Loewenstein explains, “this is why people seemed to initially overreact to the risk of terrorism in the years immediately following 9/11 [and the Bali bombings], but tend to underreact to the much more familiar and more likely risks of talking on the mobile phone while driving, and wearing seatbelts”.


But when thinking about difficult, exciting, interesting activities, such as investing in a new business, or perhaps buying a $10 million lottery ticket, the brain areas associated with emotion — such as the midbrain dopamine system — become more active.

Images, colours, music, even social discussion means that the midbrain emotional area becomes dominant, and the rational part of the brain finds it hard to resist the temptation. The emotional centres of the brain simply tell the rational part to shape up or ship out.

And then a funny thing happens:

The rational part of the brain agrees, and starts to look for evidence that supports the emotional brain — it becomes an ally in the search for reasons why the emotional choice is a good one.

The value of optimism.