A Description–Experience Framework of the Psychology of Risk

Abstract

The modern world holds countless risks for humanity, both large-scale and intimately personal—from cyberwarfare, pandemics, and climate change to sexually transmitted diseases and drug use and abuse. Many risks have prompted institutional, regulatory, and technological countermeasures, the success of which depends to some extent on how individuals learn about the risks in question. We distinguish between two powerful but imperfect teachers of risk. First, people may learn by consulting symbolic and descriptive material, such as warnings, statistics, and images. More often than not, however, a risk’s fluidity defies precise description. Second, people may learn about risks through personal experience. Responses to risk can differ systematically depending on whether people learn through one mode, both, or neither. One reason for these differences—and by no means the only reason—is the discrepancy in the cognitive impact that rare events (typically the risk event) and common events (typically the nonoccurrence of the risk event) have on the decision maker. We propose a description–experience framework that highlights not only the impact of each mode of learning but also the effects of their interplay on individuals’ and collectives’ responses to risk. We outline numerous research questions and themes suggested by this framework.

Can Simulated Experience Be Harnessed to Help People Make Investment Decisions?

“…The power of simulations to communicate risk effectively has become evident in recent years (Hertwig & Wulff, 2022). Simulations help people make probability judgments more accurately (Hogarth & Soyer, 2011), judge the risk of medications such as opioids more precisely (Wegwarth et al, 2022), and engage in financial risk with more knowledge and confidence (Bradbury et al, 2015;Kaufmann et al, 2013).…”

“…In general, people seem not only to be persuaded more by their experience than by described sources of information, but to have more accurate subjective assessments of risks, even if experience is simulated (Hertwig & Wulff, 2022). Kaufmann et al (2013) and Bradbury et al (2015) show that simulations of the stock market, which are closer to the notion of witnessing rather than experiencing through action, help investors understand risk accurately, and lead them to invest more in the stock market than investors who learn from described sources.…”

“…Consistent with this observation, Barron et al (2008) show that people are more likely to ignore a described warning if they have already experienced a series of safe outcomes, but they are more likely to be persuaded by the warning if they have no previous experience. These studies converge in that people tend to overweight the information they gain from experience over that which is provided in a descriptive form; this can lead to more accurate risk assessments, as long as the experiences are representative of the environment (for reviews, see Hertwig & Wulff, 2022;Wulff et al, 2018).…”

A decision‐making experiment under wind power forecast uncertainty

“…Often, users are presented with a description of a probabilistic forecast—without a chance to experience their use in context. Basic research on “decisions from experience” (e.g., Hertwig & Erev, 2009; Hertwig & Wulff, 2021), however, shows that people may adjust decisions over trials, if given feedback about the outcomes of their decisions—and can develop a less biased interpretation of the uncertainty than when making decisions based on a description alone. This suggests that “simulated experience” with such decisions could help users to overcome their reluctance to use probabilistic wind power forecasts, develop their own decisions thresholds but also a better understanding of the conveyed forecast uncertainty.…”

Internal uncertainty impacts social information use in risky choice across adolescence

“…Many experiments require decisions under risk, where all information about outcomes and probabilities is provided 21,30,[32][33][34][35][36] . However, the hazards of most adolescent risk-taking behaviours outside of the laboratory are often not readily available and individual experiences often contradict descriptive warnings about the consequences of risk-taking 37 . Many risks like smoking, getting drunk or skipping school can be rewarding and negative consequences may occur only after repeated rewarding experiences or not at all.…”