Risk Taking

Definition

When people take risks, they engage in behaviors that could lead to negative consequences such as physical injury, social rejection, legal troubles, or financial losses. Behaviors that are more likely to lead to such outcomes are considered riskier than behaviors that are less likely to lead to such outcomes. Regardless of the degree of risk involved, however, behaviors of any type can lead to both positive and negative consequences. People who take risks think about consequences in one of two ways. The first way involves an awareness that a behavior such as gambling could lead to both positive and negative consequences (e.g., their winnings could increase further or they could lose all of their money), but people engage in the behavior anyway because they assume that the positive consequences are more likely than the negative consequences. In contrast, people who think about consequences in the second way do not seem to consider both positive and negative consequences at the time when they are thinking about engaging in the behavior. Instead, they only seem to consider the possible positive consequences. If they had considered the negative consequences as well, they might not have taken the risk.

Major Issues in Risk-Taking Research

Researchers from a wide range of disciplines have been interested in risk taking for a variety of reasons. Economists and other financial experts, for example, have considered the implications of philosophical, mathematical, and psychological analyses of risk taking for making wise investment decisions. Given that nearly all financial decisions carry some degree of risk, the focus is not on how one can avoid taking risks. Rather, the focus is on how one can maximize financial gains while minimizing financial losses.

Cognitive psychologists, in contrast, have been less interested in financial decisions and more interested in the ways in which the human mind copes with all the information and possibilities that may be present in a risk-taking situation. People cannot consider all the possible positive and negative consequences of their choices because doing so would require much more memory ability and processing capacity than the human mind possesses. Instead, they simplify the task for themselves by only considering certain kinds of information, narrowing down their options to one or two, and relying on rules of thumb that are usually (but not always) useful guides to selection. Whereas many scholars (especially evolutionary psychologists) now argue that such strategies are highly adaptive and usually inconsequential, others have shown in experiments how simplifying tendencies can lead to systematic [Page 759]decision errors and inconsistent choices across similar situations.

For example, when presented with hypothetical health policy choices, people make different choices depending on how the information is “framed.” In one study, one group of participants was willing to implement a risky health policy involving a vaccination plan when they were told only that the vaccination would likely “save the lives of 600 people” in a particular town (population = 1,000). A second group, in contrast, was unwilling to implement the policy when they were only told that “400 people might die” if the plan were implemented. Thus, people made different choices even though the choices were formally identical. People presented with the first frame failed to realize that although 600 would be saved, 400 would not be. People presented with the second frame failed to draw the opposite inference.

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