Daniel Kahneman and risk
By K. W. Clark
web posted September 15, 2025
"Apples cause cancer!" The environmentalists were in tears! How could anyone use a chemical so dangerous as Alar on a person's food? An otherwise innocent study (as far as giving lab mice huge doses of random chemicals can be called "innocent") showed that a chemical called Alar, used by the apple industry to improve the appearance of the product and regulate growth, could, in massive doses, cause cancer. In hindsight, this entire incident was silly, as the amount of Alar present on each apple was minuscule, and the only real health concern was that now people weren't eating as much fresh fruit. However, as Mr. Kahneman describes in his chapter titled "Availability, Emotion, and Risk" in his excellent book "Thinking, Fast and Slow," this is only one example of people's terrible judgment concerning risk.
The "Alar Scare," as it was called, is an example of what Kahneman calls an "availability cascade." This exponential effect is caused when people begin to notice something potentially risky, often because the media covers it. They then begin to see this risk in more and more places, which causes, if enough people get worried, another media story about it. This in turn causes even more people to worry, and in a rapidly descending spiral of paranoia the entire community is paralyzed and no longer eats apples.
The availability cascade is not the only example of how availability effects people's comprehension of risk. In a study quoted by Kahneman, researchers asked a series of questions involving the volunteer's perception of risk. The results were interesting: tornadoes were thought to be more deadly than asthma, even though asthma causes 20 times more deaths. Likewise, death by lightning was deemed less likely than death by botulism, even though you are 52 times more likely to become a one-use lightning rod. According to Kahneman, "The lesson is clear: estimates of death are warped by media coverage." After all, when do you hear about somebody dying of botulism? Who even knows what botulism is? On the other hand, if somebody is killed by lightning, no doubt the local news will cover it, with plenty of dramatic pictures.
Availability was not the only risk-related topic covered. According to another study quoted by Kahneman, emotion also has a strong part to play when determining risk. The example cited specifically involved technology: if the person responding to the study already had a favorable opinion of the technology in question (food preservatives, cars, etc…) they were much more likely to downplay the risk involved, whereas if they already had a negative opinion of the technology, they would downplay the benefits, regardless of actual risks or benefits. Most of the time, the volunteers would not even know that they were doing this.
The effects of risk/benefit analysis (good or bad) on the economy are legion. As previously mentioned, bad risk analysis caused a large drop in apple profits one year, and there are far more examples like it. Not only that, but those are only the most obvious and easy to identify. A wealthy investor may put money in a riskier company simply because he likes their product, whereas he may ignore much better investments because he had a bad experience once with a similar service. Entire industries can collapse because they are now linked to something deemed risky. How people view risk controls the economy. As Paul Slovic said "Defining risk is an exercise in power." 
K. W. Clark is a high school student studying AP Macroeconomics. This is his first contribution to Enter Stage Right. (c) 2025 K. W. Clark
