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