Risky Psychology

There was a very nice article by Tim Harford in Slate last week.

In it, Harford discussed the fact that people often make economically unsound decisions because their fear of risk and loss is way out of proportion to the actual expected costs.

I don’t blame insurance companies for taking advantage of this demand people have to hedge their risks; even when it will almost certainly make them (the people) worse off monetarily

But, I do think people would be better off if they would think about the issue, decide to try to put things into proper perspective, and resolve to discover and pursue the course that makes the most sense.

Sometimes, it makes sense to spend money to soothe one’s fears.

But, if it’s possible to reduce one’s fears by thinking about the truth of the matter, then I think we should try.

Some risks are worth taking. Becoming more comfortable with taking them will pay off in many ways.

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