Risk as Feelings

Authors: George F. Loewenstein, Carnegie Mellon University; Elke U. Weber, Columbia University; Christopher K. Hsee, University of Chicago; Ned Welch, Carnegie Mellon University

Publication: Psychological Bulletin

Year: 2001

Focus Area: Decision making, Emotion, Risk

Relevance: Financial decisions – including decisions to buy into a deal that turns out to be a fraud – often require an assessment of risk and reward. This paper explains one theory about the importance of emotion in weighing risky decisions.

Summary: Past research on decision making has been “consequentialist” – built upon the assumption that people make decisions based on their assessment of the consequences of the various options available to them. This approach to decision making accounts for anticipated emotions, or emotions that a person expects to experience in the future as a result of the decision, but does not incorporate anticipatory emotions, or the “immediate visceral reactions […] to risks and uncertainties.”

  • This paper proposes a risk-as-feelings hypothesis in which emotional responses like worry and anxiety, which develop in reaction to the decision making task itself, influence cognitive evaluations about the probability and desirability of potential outcomes.
  • These emotional responses can contradict cognitive, or rational, assessments of risk – making people more or less willing to make a particular risky decision than one might expect.
  • This article is focused on decisions about risk, but the authors suggest that the main points can be extended to other kinds of decisions.

Author Abstract: Virtually all current theories of choice under risk or uncertainty are cognitive and consequentialist. They assume that people assess the desirability and likelihood of possible outcomes of choice alternatives and integrate this information through some type of expectation-based calculus to arrive at a decision. The authors propose an alternative theoretical perspective, the risk-as-feelings hypothesis, that highlights the role of affect experienced at the moment of decision making. Drawing on research from clinical, physiological, and other subfields of psychology, they show that emotional reactions to risky situations often diverge from cognitive assessments of those risks. When such divergence occurs, emotional reactions often drive behavior. The risk-as-feelings hypothesis is shown to explain a wide range of phenomena that have resisted interpretation in cognitive-consequentialist terms.

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