The Psychology of Everyday Life: Motivation and the Search For Happiness

The Psychology of Money

How well do we evaluate the probability of risk and reward?

Our emotions are not very good at considering probability. We are highly attuned to the intensity of a risk or reward and get emotionally aroused by high value rewards or risks, but we do a poor job of balancing the intensity of a consequence with its probability. For example, many people are more afraid of a terrorist attack than of hypertension, although far more people in the developed Western world will die from heart disease than from a terrorist attack.


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