Alan Berger, Massachusetts Institute of Technology
Case Brown, Project for Reclamation Excellence (P-REX), and Clemson University
Carolyn Kousky, Resources for the Future
Richard Zeckhauser, Harvard University
The economist’s model of rational decision making in situations of risk is composed of five elements: (1) consideration of probability, (2) valuation of potential benefits and losses, (3) accurate use of (subjective) probability and statistics, (4) delineation and evaluation of all available alternatives, and (5) incorporation of all benefits and costs accruing to the decision maker.
Often, however, individuals fail to address one or more of these elements, giving rise to what we call the ...