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the research that this paper is focusing on with Elka Weber colleague from Columbia University is really how do we
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link short-term decision-making with long-term strategies and in particular we are concerned with respect that
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individuals do not adopt measures prior to a disaster weather or focus on climate change prop before it actually
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may have a serious effect and how we can develop measures for actually getting them to do this by literally
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highlighting not only the long-term aspects of decision making but also the fact that they can benefit in the short
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term by doing so this builds on some of the work that Daniel Kahneman has done in his book Thinking Fast and Slow as
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well as a whole program of research that the warden risk management and decision
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process center is following key takeaways from this particular paper are that unless you can develop some
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short-term incentives to get people to think about a long-term issue like climate change it's going to be very
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hard for them to take measures today we have been looking at two elements in this respect one of them has to do with
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energy efficiency and the challenges that people have in terms of adopting measures that can reduce the carbon in
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the atmosphere but may cost them more money up front too and to actually invest in and similarly we are looking
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at protection against floods and the use of flood insurance and also adapting measures that could be fairly costly to
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reduce the damages in the future and unless we can develop strategies for dealing with that we're not going to be
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able to get people to do them I think that the conclusion that surprised us the most was that people
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expected others to take these measures but they weren't going to take them themselves they expected that people
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should be concerned about climate change and that other people might be concerned
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but they themselves had less of a concern with respect to adopting these measures and I think that's what led us
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to really say we've got to figure out some ways that they themselves will pay
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attention to taking these steps rather than thinking that others may do that but they themselves would not
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the one thing that the study dispels is that if we believe that people are rational in the sense that they make the
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trade-offs between the costs and the benefits and think over long periods of time which is what they should do in
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theory when they're thinking about the benefits of a measure to reduce the cost
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of energy or to improve their house they should be thinking over a period of years rather than days or weeks or
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months and people don't do that and I think that is something we have to really appreciate if we're going to
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really be able to make decisions that people will actually undertake well what we concluded on the basis of
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the research we did is that if we could provide some type of long-term loans for
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individuals so that they wouldn't have to pay the upfront cost of a energy-efficient measure or the
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adaptation of their of to make their house safer there would be a lot more willing to undertake them particularly
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if they could see the short term benefits let me illustrate with respect to flood insurance if you actually we
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have a risk-based insurance premium a premium that reflects risk and you have a person who is willing to make their
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house safer by let's say elevating their house of flood proofing their house they
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would get a loan to do this if the measure is a cost-effective measure the actual reduction in the premium will be
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greater than the cost of the loan and if that's the case then the individual
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would say this is financially attractive to me in the short run but it also has the benefit of making the house safer in
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the long run reducing the cost if there happens to be another severe flood in the future such as the ones we're having
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currently in Texas and as a result it's something that will be attractive not
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only to them but also to all of us taxpayers because we'll have to pay a lot less in the way of disaster relief
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I think what sets this researcher part is we are really trying to link several features of risk the risk assessment
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which is the science of risk with risk perception which is how people behave to risk management which is what we can do
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to improve decision-making very similarly a similar analogy is we're trying to understand how one should
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behave we're on trying to understand how one does behave and they were trying to
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suggest measures as to how we can improve behavior so we come closer to how what should be
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this research is part of a much longer strategy that the Wharton risk management and decision process center
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is following we're trying to really understand ways that we can develop long-term strategies we've just finished
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a book on leadership dispatches with respect to Chile and how they responded to the earthquake we're in the process
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myself and my colleague Mike you seem and Erin Michelle K Jean in working on a project on how ceos and CR o's of the
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S&P 500 are dealing with catastrophic risk and how we can prove behavior and
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I'm also working with my co-director Robert Myer on ways that we can better understand developing incentives for
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people to undertake protective measures before the disaster rather than waiting for the disaster to occur before they
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take action you