High Risk, High Reward: Risk Sensitive Decisions for Climate Change Mitigation

• In Event: The Psychology of Climate Change

Abstract

As the urgency of mitigating climate change rises, investment in high-risk/high-reward innovations may be crucial. Yet existing behavioral models for studying mitigation assume that investments in mitigation technology have small but certain payoffs. Thus, political science knows little about citizens’ views of risky mitigation technology. We use the collective risk social dilemma, an experimental economic game with real money at stake, to simulate investment in high-risk/high-reward technology. In our experiment, small groups of players must collectively contribute money to climate change mitigation; if they fail to contribute enough, they stand to lose all their remaining wealth. Each member must decide to contribute a small, certain investment or a variable investment with a large potential upside but an equal chance of failure. Importantly, both the certain and risky investments have equal expected value. Alternatively, players can simply defect and not contribute. Across five conditions, to manipulate the difficulty of mitigation, we vary the amount of contributions required. To predict players’ behavior, we draw on risk sensitive decision theory, which has been used for over three decades in evolutionary biology. Traditional theories, like expected value, expected utility, or prospect theory, predict decisions based on the maximization of some quantity (e.g., value, utility). The novel feature of risk sensitive theory is that it explicitly uses the variability of potential outcomes of each choice when making decisions. Risk sensitive theory uniquely predicts that, as the costs of mitigation increase, players will be more willing to make high-risk/high-reward investments. This is because at some point the high costs can only be met if a number of players in the group make risky investments which successfully pay off. Consistent with risk sensitive theory, but not with other theories, as the amount required to mitigate climate change increases we find an increased tendency to invest in high-risk/high-reward technologies. Although we study laypeople, not elites, our findings suggest that citizens may view political elite spending on risky climate technology as legitimate, so long as citizens also view the problem of climate change as sufficiently severe.

Authors

• Talbot Marley Andrews, Stony Brook University

• Andrew Delton, Stony Brook University

• Reuben Kline, SUNY, Stony Brook University