SMALLPOX AND PROSPECT THEORY….One of my favorite economic playthings is Prospect Theory, which won a Nobel Prize for its inventor, Daniel Kahneman, last year. (Its co-inventor, Amos Tversky, died in 1996, and therefore wasn’t eligible.)
One of the key elements of prospect theory is something called framing effects: the way we react to risky decisions depends on how the decisions are framed. This was famously demonstrated by Kahneman and Tversky in a question about how people react when faced with a decision about how to handle an expected outbreak of a deadly disease.
Guess what? A hot topic these days is how we should react to the possibility of a terrorist-induced outbreak of smallpox, so you’d think prospect theory might have something to say. Well, Mark Kleiman makes the case here, and he thinks that reluctance to perform mass vaccinations is a good example of framing effects at work.
I don’t know if he’s right (difficulty in figuring the probabilities might be the real culprit), but it’s an interesting approach.