Collective Hesitation: Two Models of Loss Aversion to Explain Our Hesitation to Act on Climate Change and COVID-19

What explains our collective hesitation to act in the face of catastrophic uncertainty? Note here that collective hesitationimplies our inability to act collectively and with solidarity. To be sure, there will always be early adopters of reform and key influencers. To take the issue of climate change for example, Jimmy Carter had 32 solar panels installed on the White House West Wing roof in the summer of 1979; he was an early adopter of reform. With his documentary called The Inconvenient Truth, Al Gore was a key influencer in the movement to de-carbonize. However, by and large, collective action has been deferred. Individuals, communities and nations continue to act reluctantly despite expert proclamations that urgent action is required immediately. Why?

Well, for one, it takes more than logic and willpower to affect lasting change. Both on a personal and collective level. In fact, the psychologists John Tierney and Roy Baumeister, authors of the eponymous Willpower book, argue in their latest offering that humans are biologically hardwired to fear losing. This fear of loss is stronger than its corollary drive, the desire to gain. For example, it has been demonstrated that people would demand much high prices to give up something than they would pay to obtain that thing of similar or identical value.

Before we go further and illustrate the concept of loss aversion in the context of collective inaction to address climate change or COVID-19, let us unpack the other term: uncertainty. The economist Frank Knight argued in his seminal book that uncertainty is to be differentiated from risk. In the latter, all outcomes as well as the probabilities of each outcome are known beforehand. Therefore, optimal decisions can be made on the basis of computation alone. An example of risk is the card game blackjack. It is possible to calculate every card combination for each hand a player and dealer are dealt. From there, probabilities can be calculated along with associated rules for action. In fact, this is known as basic strategy. In conditions of uncertainty however, possible outcomes may be known but not necessarily their probabilities or even their consequences. To take this example further, let us suppose that you played the game of blackjack but the deck was assembled from a random assortment of several other decks—there would be no way to calculate the probability of the next cards appearance based on the previous cards. Or let us say that the cards would arbitrarily change numbers. There would be no way to calculate the consequences of obtaining a given hand. This is the wicked problem of uncertainty. Climate change and COVID-19 are both examples of uncertainty problems. With climate change, there is no certainty of how much the global temperature will rise, and even if we knew how much the temperature would rise, we cannot know how the future population will be affected. Movies that depict the urgency of such problems usually conflate certainty with uncertainty.

Coming back to the theme of loss aversion, it seems that there are two magnitudes of loss that we differentially respond to. The first is the magnitude of potential impact. Smoking, for example, has a large personal magnitude of potential impact as does driving (especially without a seatbelt). Climate change—although it’s effects are uncertain—has a very large collective magnitude of potential impact (including globally displacing a large segment of the population, triggering mass extinctions, causing irrevocable cascades of death, war, disease and suffering etc.). The smaller the potential impact, the less the aversion towards loss. After all, consuming one more donut is likely to contribute to poorer health—but only by the smallest of margins. The second magnitude concerns temporal proximity. Losses that are further away in time e.g., the potential cancer caused by smoking or the global effects of climate change, tend to be exponentially diminished in threat valence. In other words, our degree of loss aversion radically decreases the further away the potential loss is located into the (uncertain) future. Perhaps this disinhibition towards risk of future events is reduced in environments that are not uncertain. After all, if a person kept rolling the dice of playing blackjack (conditions of calculable risk), they are bound to lose. It is much more rational to ‘quit while ahead’ and avert future losses. Indeed, this is what we see many (but not all) people do. After all, the house usually wins.

One also wonders if these patterns of loss aversion have some neurobiological and even political correlations. For example, might more liberal minds be geared towards loss aversion in an absolute sense with respect to potential impact? Liberals tend, for example, to oppose climate change, nuclear power, herd immunization, and capitalist expansion. These conditions all threaten potentially large magnitudes of aversive impact even though the timeline for when—or even if—the catastrophic outcomes will happen is far from certain. Conservatives, perhaps, are more prone towards loss aversion of things within immediate temporal proximity. For example, changes in gun laws, abortion, climate action, vaccination/social distancing. These measures all effect immediate losses (i.e., changes in way of life, situational conveniences) in hopes of preventing larger magnitude—and potentially uncertain—social consequences.

Phenomenologically, certainty has an inherently temporal gradient. Things appear more certain in the immediate present and less certain as we extend into the future. What this means is that the liberal mode of loss aversion is undermined—as the magnitude of aversive impact from potential losses is clouded in highly uncertain probabilities as these impacts extend into the future. However, the conservative mode of loss aversion is inherently privileged. After all, immediate losses appear far less uncertain than potential future losses. Therefore, although people may be swinging more towards liberal ideologies, neurobiologically, we are more skewed towards a conservative perception of loss aversion when it comes to evaluating collective threats and our responses to them.

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