“for example, we consider having a gun in the house far more dangerous to children than say, a swimming pool, but in fact children die at the rate of 1 per 11,000 swimming pools, but only at the rate of 1 for more than a million guns. There is even a formula to express the emotional component of risk assessment:

Risk Equals Hazard Plus Outrage (or dread)

What it means is that people try to exaggerate high outrage risks like mad cow disease and terrorism, while tending to ignore low –outrage risks like kitchen infections, although these may in fact be far less dangerous”

From “Mobs, Messiahs and Markets” by William Bonner and Lila Rajiva

HKO comments – this also explains why we get little improvement in our lives from government meddling. The political payoff is far greater for taking action against dread and outrage than real risks. This is why there is no NRA for pool owners needed to protect their rights to risk their children’s lives in order to exercise (no pun intended) their right to swim.

Risk profiles change rapidly over time. How important was terrorsim in assessing risk on September 10, 2001 relative to a week later? How has the investment risk assesment of investing in Viet Nam or China changed in the last ten years?

This is why raising taxes and business costs is so risky. It changes the risk profile in ways that arrogant policy planners could never anticipate.

print