Worst-Case Economics Part I - Cognitive Bias by Behind The Switch

Why do humans seem to have such a poor understanding of risks? Why do we struggle to collectively quantify the chances of extreme scenarios? How have our economic methodologies caused us to downplay worst-case scenarios not just in finance, but in climate change and ecology as well?

Dr. Frank Ackerman is Principal Economist at Synapse Energy Economics, and has just released a fantastic book named "Worst-Case Economics" which examines these very questions. Frank goes in depth as to the origins of these biases in modeling that seem to come back to harm us time and time again. His work is insightful and provocative, and we were fortunate enough to sit in on a webinar Frank gave on his new book. We'll be bringing you some of our favorite excerpts in the coming weeks in two special editions of Behind the Switch. Hope you enjoy!