Risk, Incentives, and Culture

  • Michael J. Mazarr

Abstract

Risk management procedures exist in part to create objective, abstract answers without bias. This is an important objective, but as we have seen it runs up against a number of powerful realities of human organizations, from personalities to cognitive biases. Behavior is a function of many variables; avoiding risk is one, but there are many others that can be equally powerful. In many ways the essential story of the financial crisis can be boiled down to economic agents acting according to perverse incentives. In particular, judgments do not take place in a vacuum; the human factors that influence the perception of risk take root in a social and institutional context. Peoples’ perception of risk is also a function of these broader environmental factors. A critical lesson of the crisis is that different environments can generate different levels of incentive to take risk.

Keywords

Dust Income Assure Boiling Arena 

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Notes

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Copyright information

© The Author(s) 2016

Authors and Affiliations

  • Michael J. Mazarr
    • 1
  1. 1.RAND CorporationArlingtonUSA

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