|Type||Conference Paper - Working Group in African Political Economy meeting, University of California, Berkeley, CA|
|Title||“Rational Fatalism”: Non-Monotonic Choices in Response to Risk|
Life is full of decisions that involve weighing the definite benefits of an act against
uncertain, but potentially large consequences. When people consider everything from smoking
and drinking to exposure to chemicals to risky sex to merely driving to work, they face a
probabilistic chance of a bad outcome, and decide whether it’s worth it to take a chance.
Typically research has assumed “self-protective” responses to risks – that when the per-act risk
goes up, people take fewer chances.2
In this paper, I show that rational actors may also respond
“fatalistically” – by increasing their risk-taking when per-act risks rise, and describe a general
model of “rational fatalism” in which the choice of the number of risky acts is a non-monotonic
function of the per-act risk, so that behavior has a both a self-protective and a fatalistic region.
This leads to a fundamental non-monotonicity in people’s behavior – their responses switch from
downward-sloping to upward-sloping depending on the value of the per-act risk. This nonmonotonicity
is driven by a history of past risks taken for which outcome is still unrealized.
Logically, this might apply to HIV infection, contracting cancer from smoking, or lung damage
from asbestos exposure. The logic is fairly straightforward: people who are convinced that the
bad outcome is sure to happen perceive no benefit from reducing their risk-taking. In contrast
with previous research I show that this result holds for any reasonable benefit function for the
risky acts, and for a wide range of risk aggregation functions including those that might be
employed by people with a limited background in mathematics. I also demonstrate that fatalistic
behavior can exist for interior solutions, rather than solely in situations where agents choose the
maximal number of risks allowed in the model.
|»||Tanzania - Kagera Health and Development Survey 1991-1994 (Wave 1 to 4 Panel)|