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(Nancy Kaufman) #1
Market Failure Due to Imperfect Information 469

with risk assessments all the time. Psychologists have questioned ordinary peo-
ple to see how accurately they can gauge risks. In a classic study, the psycholo-
gist Paul Slovik asked 15 national experts and 40 members of the League of
Women’s Voters to rank the everyday risks listed in Table 11.2. You can use the
alphabetically ordered list of activities in the table to test your own “risk apti-
tude.” Before turning to Table 11.3, rank the items in Table 11.2 from 1 to 30
in descending order of risk. (In constructing your ranking, consider the total
risk to society of the activity or technology.)^15
Table 11.3 lists the activities and compares the rankings of experts and
ordinary people (members of the league). Scanning the list, one observes some
general level of agreement between the two rankings. Certain items (hand-
guns, motorcycles, smoking) are ranked as high risk and others as low risk
(antibiotics, home appliances, power mowers) by both groups.
More interesting, however, are the gaps between people’s risk perceptions
and experts’ judgments. Psychologists have found that several factors affect the
average person’s risk perception. Risks that loom largest in people’s perceptions
are those that are most visible, imposed (rather than voluntary or under one’s

TABLE 11.2
Risky Choices

How would you rank
the following items in
order of risk?

Activity or Your Risk
Technology Ranking

Alcoholic beverages ________
Antibiotics ________
Bicycles ________
Commercial aviation ________
Contraceptives ________
Electric power ________
Fire fighting ________
Food coloring ________
Food preservatives ________
Handguns ________
High school and
college football ________
Home appliances ________
Hunting ________
Large construction ________
Motorcycles ________

Activity or Your Risk
Technology Ranking

Motor vehicles ________
Mountain climbing ________
Nuclear power ________
Pesticides ________
Police work ________
Power mowers ________
Private aviation ________
Railroads ________
Skiing ________
Smoking ________
Spray cans ________
Surgery ________
Swimming ________
Vaccinations ________
X-rays ________

(^15) These research results appear in Paul Slovik, “Perception of Risk,’’ Science(1987): 280–285.
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