Table of Contents

Introduction
An Idea Whose Time Has Come
Erwann Michel-Kerjan and Paul Slovic

PART ONE
IRRATIONAL TIMES                                                 9

1     Superstition
A Common Irrationality?
Thomas Schelling   11

2     Berserk Weather Forecasters, Beauty Contests, and Delicious Apples on Wall Street
George A. Akerlof and Robert J. Shiller   16

3     Subways, Coconuts, and Foggy Minefields: An Approach to
Studying Future-Choice Decisions
Robin M. Hogarth   21

4     The More Who Die, the Less We Care
Paul Slovic   30

5     Haven’t You Switched to Risk Management 2.0 Yet?
Moving Toward a New Risk Architecture
Erwann Michel-Kerjan   41

 

PART TWO
ARE WE ASKING THE RIGHT QUESTIONS?
ECONOMIC MODELS and RATIONALITY                                              51

6     A Two-Edged Sword
Implications of Decision Psychology for Decision Analysis
Paul J. H. Schoemaker 53

7     Constructed Preference and the Quest for Rationality
   David H. Krantz 65

8     What If You Know You Will Have to Explain Your Choices to Others
Afterwards? Legitimation in Decision Making
Paul R. Kleindorfer 72

9     Neuroeconomics: Measuring Cognition and Brain Activity During
Economic Decision Making
Colin F. Camerer   79

10   The Useful Brain
How Neuroeconomics Might Change Our Views on Rationality and a
Couple of Other Things
Olivier Oullier    88

 

PART THREE
INDIVIDUAL DECISIONS IN DANGEROUS and UNCERTAIN WORLD     97

11   Virgin Versus Experienced Risks
Carolyn Kousky, John Pratt, and Richard Zeckhauser    99

12   How Do We Manage an Uncertain Future?
Ambiguity Today Is Not Ambiguity Tomorrow
Ayse Öncüler    107

14   Dreadful Possibilities, Neglected Probabilities
        Cass R. Sunstein and Richard Zeckhauser    116

15   Why We Still Fail to Learn from Disasters
        Robert Meyer    124

16   Dumb Decisions or as Smart as the Average Politician?
        Economic and Behavioral Explanations for Insurance Demand
        Mark V. Pauly    132

17   The Hold-Up Problem
Why It Is Urgent to Rethink the Economics of Disaster
Insurance Protection
W. Kip Viscusi    142

 

PART FOUR
MANAGING and FINANCING EXTREME EVENTS      149

18   The Peculiar Politics of American Disaster Policy
How Television Has Changed Federal Relief
David Moss    151

19   Catastrophe Insurance and Regulatory Reform After the
Subprime Mortgage Crisis
Dwight M. Jaffee    161

20   Toward Financial Stability: Lessons from Catastrophe
Reinsurance
Kenneth A. Froot    171

21   Economic Theory and the Financial Crisis
How Inefficient Incentives Can Lead to Catastrophes
Kenneth Arrow    183

22   Environmental Politics
Are You a Conservative?
Geoffrey Heal    192

23   Act Now, Later, or Never?
The Challenges of Managing Long-Term Risks
Christian Gollier    200

24   Climate Change
Insuring Risk and Changes in Risk
Neil Doherty    210

25   International Social Protection in the Face of Climate Change
Developing Insurance for the Poor
Joanne Linnerooth-Bayer    220

 

PART FIVE
WHAT DIFFERENCE CAN WE MAKE?                                              231

26   Are We Making a Difference?
        Baruch Fischhoff    233

27   Thinking Clearly
        The Importance of Training Policy Makers in Decision Sciences
        Ralph L. Keeney    239

28   Decision Making
        A View on Tomorrow
        Howard Raiffa    248

29   Influential Social Science, Risks, and Disasters
        A View from the National Science Foundation
        Robert E. O’Connor and Dennis E. Wenger    254

30   Reflections and Guiding Principles for Dealing with
        Societal Risks
        Howard Kunreuther    263

Acknowledgments
An Unusual Journey: Homage to Howard Kunreuther    275
Notes    281
About the Contributors    297
Index    311