PsychologicalDUAL-USE

Zero-Risk Bias

What it is

A preference for reducing a small risk all the way to zero over reducing a larger risk by a greater amount — the pull of certainty over expected value.

How it works

Baron, Gowda and Kunreuther (1993) asked people to choose between cleanup plans for hazardous-waste sites; a plan that eliminated the risk at one site entirely was preferred over a plan that removed more total risk but left some behind. Viscusi, Magat and Huber (1987) had found the same premium for certainty in consumer products: people would pay proportionally far more to take the last small risk of an insecticide to zero than to make an equal reduction higher up the scale. The mechanism is the certainty effect described in prospect theory — probabilities are weighted nonlinearly, and the step from a little to none is felt as much larger than the step from a lot to a little. Zero also ends worry, which has a value of its own. Persuaders sell the word. Insurers price the last increment of coverage far above its expected payout; supplement and security vendors promise “100 percent safe”; the surest tell of investment fraud is a guaranteed return, because certainty is exactly what honest markets cannot offer. In policy, “zero tolerance” and “no acceptable level” slogans on every side pull spending toward eliminating visible small risks while larger, less vivid ones go unfunded.

Real-world examples

  • •Baron, Gowda and Kunreuther (1993): asked how to spend a fixed cleanup budget, respondents preferred to remove all of the risk from one waste site rather than a larger total amount of risk spread across two, accepting a smaller reduction in exchange for a zero.
  • •The Delaney Clause of the 1958 US Food Additives Amendment prohibited any additive shown to cause cancer in animals at any dose — a statutory zero that regulators later found unworkable as detection methods improved and trace quantities became measurable everywhere.
  • •Bernard Madoff's fund reported steady gains of around ten percent a year with almost no losing months through booms and crashes; the smoothness that reassured investors was, to the analyst Harry Markopolos, the signature of fraud, because real returns are never that certain.
  • •Gigerenzer (2004) estimated that hundreds of additional Americans died on the roads in the months after the September 11 attacks because travelers avoided the dread risk of flying and took on the larger everyday risk of driving.
  • •“Zero tolerance” has been the slogan of drug enforcement in the 1980s, school discipline in the 1990s, and border prosecution in 2018, while demands from other quarters to ban products at any detectable level of a contaminant trade on the same word; in each case the absolute is the selling point and the trade-off goes unstated.

Ethical guidelines

Where the line is

Selling genuine certainty at a fair price — an insurance policy that pays, a guarantee that binds the seller — is legitimate; the line is crossed when the word “zero” or “guaranteed” is used to charge for a reassurance that leaves the underlying risk unchanged, or to steer resources toward eliminating one small vivid risk at the cost of larger ones.

  • ●Present risk reductions in absolute terms across the options; if reducing a larger risk saves more lives than eliminating a smaller one, say so, even if zero sells better.
  • ●Do not use “guaranteed”, “100 percent”, or “zero” unless it is literally true and you will be bound by it.
  • ●Offering people the peace of mind of certainty at a fair price is legitimate — insurance exists for this; charging a premium for the word while leaving the risk in place is not.
  • ●In public argument, put the cost per life saved next to the slogan; if the slogan cannot survive the number, the number is the honest part.

How to defend against it

  • ►Convert every option to the same unit — deaths averted, dollars lost, hours saved — and compare totals; the option that reaches zero rarely wins on totals.
  • ►Treat “guaranteed returns” as the single most reliable fraud signal in finance; nothing that pays a return is without risk, and anyone who says otherwise is describing something that does not exist.
  • ►Ask what the last increment of certainty costs: how much more to go from one percent to zero, and what that money would buy applied to a bigger risk.
  • ►Notice the relief you feel when someone says “zero” or “never”; the relief is the product being sold, and it is separate from whether the risk has actually changed.
  • ►Prefer the plan that lowers your total exposure over the plan that removes one named fear.

References

  1. Baron, J., Gowda, R., & Kunreuther, H. (1993). Attitudes toward managing hazardous waste: What should be cleaned up and who should pay for it?. Risk Analysis, 13(2), 183-192
    The founding demonstration that complete cleanup of one site is preferred to a larger total risk reduction.
  2. Viscusi, W. K., Magat, W. A., & Huber, J. (1987). An investigation of the rationality of consumer valuations of multiple health risks. RAND Journal of Economics, 18(4), 465-479
    The certainty premium consumers pay to eliminate the last increment of a product risk.
  3. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291 · link
    The certainty effect and nonlinear probability weighting that underlie the bias.
  4. Gigerenzer, G. (2004). Dread risk, September 11, and fatal traffic accidents. Psychological Science, 15(4), 286-287
    The estimate of additional road deaths after travelers avoided flying.
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