From: Wei Dai (weidai@weidai.com)
Date: Thu Apr 24 2003 - 16:54:26 MDT
On Thu, Apr 24, 2003 at 07:43:19PM +0200, Anders Sandberg wrote:
> Are the current actions rational? I would guess a significant amount of
> economic loss is simply caused by pre-rational fears - people choosing
> not to invest in Asian stock because of imagined contagion through the
> transaction. It might not be the strongest factor in a decision, but
> even a slight discouragement like this can influence a trade. It seems
> to me that the fear is greater than the true risk, and this is what is
> causing real damage. Hence I think one thing we need to address is how
> to handle fear epidemics in addition to viral epidemics.
Why do you think that people are erring on the side of too much caution
rather than too much complacency? From an economics point of view, it's
almost certain that people are *not* being as careful as they should,
because the costs they have to bear (like wearing masks or washing hands
more frequently) are private, whereas many of the benefits (reducing the
chances of getting sick and then infecting other people) are public.
It's a classic externalities problem. In this case being irrationally
fearful might actually be a good thing for society, but I don't see why
people would be irrationally fearful.
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