Climate Change in the Great Lakes Region: Navigating an Uncertain Future

Decision Making under Climate Uncertainty: The Power of Understanding Judgment and Decision Processes

99 Decision Making under Climate Uncertainty The Power of Understanding Judgment and Decision Processes SABINE M. MARX AND ELKE U. WEBER The disciplines of economics and political science, as well as applied climate science, have added a great deal to our understanding of the obstacles to the use of climate information. However, in order for climate information to be fully embraced and successfully implemented into risk management, the issue needs to be looked at in terms of risk communication to human decision makers—as individuals (e.g., a farmer in Ontario) and in groups (e.g., Chicago city council, tourism boards). What is special about human risk perception and decision making under risk and situations of uncertainty regarding climate? This is where psychology, as applied in behavioral economics and behavioral game theory, offers important insights and tools to design effective risk-management processes, which can be of potential use to adaptive decision making in the Great Lakes region. In this chapter, we first discuss uncertainty as a barrier to predictability. We review how normative and descriptive models differ in their postulates about the processes by which people predict the likelihood of uncertain events, and choose among actions with uncertain outcomes, and among actions with delayed outcomes. Throughout this paper, we discuss the challenges (and possibly opportunities) that arise from the fact that decision makers employ simplifying heuristics that take advantage of memory and past experience, but can also lead to systematic biases, and have multiple and oftentimes conflicting goals as they are influenced by a range of qualitatively different incentives in their judgments, decisions, and actions. The chapter concludes 100| Sabine M. Marx and Elke U. Weber with suggestions on how to overcome barriers of uncertainty by using insights from behavioral decision research in constructive ways to design climate risk communication and effective decision environments that will be effective in achieving goals of possible policy interventions. UNCERTAINTY AS A BARRIER TO PREDICTABILITY Humans have a great need for predictability. It makes up an important part of our need for safety and security (Maslow 1943). Predictability has survival value. It provides control, helps avoid threats to physical and material wellbeing , and frees us from fear and anxiety. Furthermore, it allows us to plan and budget for the future. However, our abilities to predict the outcome of an action or event can be impaired when we are faced with uncertainty, i.e., situations where it is impossible to exactly describe the future outcomes of actions that are taken now. Uncertainty means that there may be unknown outcomes, unknown probabilities, and immeasurable components, leading to a real or perceived lack of control. While the term risk is used to describe choices where all outcomes and their probabilities are explicitly described, as in the case of choices between monetary lotteries in laboratory experiments (“decisions from description,” discussed below), most real-world decisions do not provide this level of information, and involve uncertainty about possible consequences and their likelihoods. Information about climate change and its impacts on the ecosystem and society, as well as mitigation and adaptation strategies, have a wide range of uncertainty associated with them. They range from model uncertainty (fundamental , structural, and parametric; see Easterling et al. in this volume) and technological uncertainty (will it work?) to social uncertainty (what will others do?), to name but a few. Whether perceived or real, lack of control when confronted with climate change raises anxiety, individually and socially. Moderate levels of anxiety are desirable, because they motivate behaviors to regain control, observable in protective or evasive action to mitigate risk, information search, and theory building (see figure 1). Science and technology development themselves can be put into this category. The developments of forecasts for weather, climate, earthquakes, or financial markets are some of society’s ways of reducing moderate levels of anxiety about sources of unpredictability. The strength of our desire for control is evident in situations where our need for control is so strong that it leads to wishful thinking. We perceive an “illusion of control” (Langer 1975) in situations that are obviously Decision Making under Uncertainty| 101 determined by chance, like predicting the color that the next spin of the roulette wheel will land on, based on past outcomes. This is often described as “gambler’s fallacy” or probability matching (expecting heads from a coin flip after a run of tails). An increasing number of studies suggest that people tend to...