Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Saturday, October 20, 2018 11:36:14 AM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Calculated risks in life

By
07th-May-2018       
Comments
Share your thought
Post a comment »
Read all () »

Jay L. Zagorsky :
Risk is everywhere and associated with everything. For example, the Centers for Disease Control and Prevention a decade ago estimated over 20 million people a year ended up in emergency rooms because of bathroom injuries.
While this figure is shockingly high, it probably won't prevent you from using the toilet or washing your hands. And in general, hiding under the bed to avoid risky decisions is not a realistic option for living life.
In part, that's because we're all risk analysts, continually weighing the costs and benefits of every decision we make. The problem is, most of us aren't actually that good at it. As an economist, I thought it would be interesting to explore how we weigh risk in our daily lives - and how we might be able to do it more accurately.
We spend a great deal of time making decisions with at least a little risk involved. Some of them are relatively ho-hum, such as what to wear to work with a minor risk of a colleague wearing the same outfit, while others are potentially fatal, such as whether to sprint across the street when the sign says "don't walk." Part of evaluating each risky situation is knowing how likely it is that something will happen. It is also just as important to know the cost if something goes wrong or the payoff if something goes well.
Scholars call the odds of something happening multiplied by the cost or payoff the "expected value" of a situation. The problem is people aren't very good at estimating the two variables required to get an expected value.
Part of expected value is understanding the probability or odds of a situation.
Probability is the chance something will happen and is simply a number from zero percent - an impossibility - to 100 per cent - a sure thing. No matter how many times a coach screams at a player to give 110 per cent, this figure is outside the realm of possibility.
Expected value requires estimating the odds that something might occur. However, when behavioral science pioneers Daniel Kahneman and Amos Tversky studied how humans estimate probabilities they found people have poor judgment calculating actual probabilities. In general, humans overstate the likelihood of rare events occurring, underestimate the chance common events will happen, and overvalue certainty.
For example, many people are terrified about flying on planes because of the possibility of a crash. However, the actual chance of someone dying in a commercial airline crash is very close to zero.
On the other hand, the flu is very common. Every year millions of people get the flu and thousands even die from it. Nevertheless, many people do not get a flu shot - almost 60 percent of adults and 40 percent of children in recent years - because they don't think they will get the flu.
The cost or the payoff is the other part of expected value. One problem is the cost or payoff isn't always as obvious as in the case of a speeding ticket, and sometimes assigning a dollar value can be complicated.
Kahneman and Tversky also found that people feel more pain from a loss than pleasure from a similar-sized dollar gain. Being forced to pay a $500 fine for running a red light makes people suffer more mental anguish than the happiness they would get from winning $500 for being randomly rewarded for stopping at a traffic light.
The particular pain from having money taken away is called loss aversion. Because people loathe or hate losses they often buy insurance. Having insurance means giving up a small certain payment today to ensure a large uncertain payment won't be required in the future. Risk is an inherent part of our lives. There is almost nothing we can do to make the world a more certain place. We all have to cross streets, and many of us have to fly in planes or drive cars.
However, when faced with a risky choice, you need to think not only about the odds but also the cost or payoff. It is less important whether you use the simpler expected value model or take into account our human quirks and use prospect theory. What really matters for making better choices is to understand that risk is more than just the chance something will occur.
(Jay L. Zagorsky is Economist and Research Scientist, The Ohio State University. Courtesy:  The Conversation).

Tariff
Add Rate

News Archive

Inside The New Nation

Editorial »

European Union must challenge the undemocratic election process


THE European Union has decided not to deploy an election observation mission during the 11th parliamentary election in Bangladesh due by January 28 next year. This has been conveyed to the Election Commission in a diplomatic note. A copy of the note verbale was also handed over to the commission ...

Sports »

Los Angeles Dodgers' Austin Barnes hits an RBI single during the fifth inning of Game 5 of the National League Championship Series baseball game against the Milwaukee Brewers in Los Angeles on Wednesday.


Cricket »

Ten-wicket Abbas destroys Australia for Pakistan's series win


AFP, Abu Dhabi :Medium pacer Mohammad Abbas took his maiden ten-wicket haul in a match to fire Pakistan to a 373-run win over Australia in the second Test in Abu Dhabi on Friday.Abbas followed his 5-33 in the first innings with figures of 5-62 to wreck Australia for 164 after ...

Entertainment »

Aamir Khan`s smile in new poster of Thugs of Hindostan


Ever since the intriguing trailer of Aamir Khan, Amitabh Bachchan, Fatima Sana Shaikh and Katrina Kaif starrer Thugs of Hindostan has been unveiled, there is much excitement around the film. The film is one of the biggest releases of the year and will hit the silver screens on November 8. ...

City »

Bangladesh General Students` Parishad formed a human chain on Friday in front of the Jatiya Press Club demanding 35 years limit applying for govt job.


Business & Economy »

Mamun-Ur-Rashid, Managing Director of Standard Bank Limited poses for photo session with the participants of a two day-long training on "Self Leadership, Advanced Managerial Skills & 21st Century Managerial Mindset" organized by the Training Institute of the Bank. Alkona K. Choudhuri, SEVP and Head of Human Resources Division of SBL, Md. Saif Noman Khan, Asst Prof. of IBA, DU, Md. Zakaria, Principal and Md. Amzad Hossain Fakir, Faculty of SBL Training Institute were present on the occasion.


International »

Trump concedes Khashoggi likely dead, threatens consequences


AP, Washington :President Donald Trump acknowledged Thursday it "certainly looks" as though missing Saudi journalist Jamal Khashoggi is dead, and he threatened "very severe" consequences if the Saudis are found to have murdered him. His warning came as the administration toughened its response to a disappearance that has sparked global ...

International »

Russians ‘will go to heaven’ in event of nuclear war: Putin


AFP, Moscow :Russians will "go to heaven" as martyrs in the event of nuclear war because Moscow will only ever use nuclear weapons in retaliation, President Vladimir Putin said Thursday."We have no concept of a preemptive strike," Putin told a forum of international experts in the southern city of Sochi ...

Football »

Chairperson of the Women's Football Committee of Bangladesh Football Federation (BFF) Mahfuza Akter Kiron speaking at a press conference at the conference room in BFF House on Thursday.


Editorial »

Finally a big loan defaulter held: Others must be nabbed soon


AFTER letting many businessmen get away with loan defaults, the government has finally become stern towards loan default and loan scammers by arresting Chattogram-based SA Group's managing director. Also a director of Mercantile Bank, Sahabuddin Alam was arrested on Wednesday on at least five counts of loan irregularities. The irregularities ...

International »

US first lady`s plane lands safely after smoke filled cabin


Reuters, Philadelphia :U.S. President Donald Trump said his wife, first lady Melania Trump, was safe on Wednesday after a mechanical problem forced her airplane, which was headed for Philadelphia, to return to the Joint Base Andrews military facility in Maryland."They had a problem, but she's fine," Trump said in an ...

Entertainment »

Tale of a rock legend


Sheikh Arif Bulbon :Ayub Bachchu, mostly known as AB, is the legendary name in the history of Bangladeshi band music. He was born in Chattogram on August 16, 1962. With tremendous fan acceptance Ayub Bachchu is famous for his fabulous guitar playing. He has started his music career from his ...

City »

A view of the protest meeting organized by United Students Forum held at the Jatiya Press Club demanding release of BNP Chairperson Begum Khaleda Zia and stoppage of giving farcical judgement in fake cases against Tarek Rahman on Thursday. Among others, Senior leader Nazrul Islam Khan was present on the occasion.


Football »

Groeneveld scores as Netherlands draw 1-1 with Belgium


AP, Brussels :Arnaut Groeneveld celebrated his first start for the Netherlands by scoring a first-half equalizer Tuesday as the Dutch drew 1-1 with neighbor Belgium.The 21-year-old midfielder who plays for Belgium's Club Brugge rounded off a flowing Dutch move in the 27th minute, controlling the ball with his left foot ...

Football »

Brazil's Miranda silences Argentina with last-gasp winner


AFP, Jeddah :Brazil snatched a dramatic 1-0 win over Argentina with an injury-time header from Miranda in their friendly match in front of a sell-out crowd in Jeddah, Saudi Arabia on Tuesday.The Inter Milan centre-back was left all alone to thump in a 93rd-minute effort from Neymar's corner when the ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news