Overestimating tail risks makes sense - Deepstash

Overestimating tail risks makes sense

It’s perfectly rational to overestimate some tail risks because you can’t consider them in isolation. 

Driving after 2 glasses of wine once will not be extremely dangerous, but doing so every day is.

When you measure tail risks in the laboratory you only consider one tail risks at a time, and that’s why their conclusions are wrong.
Subjects are being rational in overestimating the risk because, chances are, they are likely already running several tail risks in their lives.

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jjasper

Hammack lover. Especially with a good book in hand.

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