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Stepping Out of Your Own Shadow: A Didactic Example of How Facing Uncertainty Can Improve Decision‐Making

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  • Adam M. Finkel

Abstract

Advocates of quantitative uncertainty analysis (QUA) have invested substantial effort in explaining why uncertainty is a crucial aspect of risk and yet have devoted much less effort to explaining how QUA can improve the risk manager's performance. This paper develops a teaching example, using a personal decision problem with subtle parallels to societal risk management, to show how choices made with increasing appreciation of uncertainty are superior ones. In the hypothetical, five analysts explain the same uncertain prospect (whether to invest in a volatile stock issue), with increasing attention to the nuances of uncertainty. The path through these different perspectives on the decision demonstrates four general points applicable to environmental risk management: (1) Various point estimates with equal claim to being “best estimates” can differ markedly from each other and lead to diametrically different choices; (2) “conservatism” has both relative and absolute meanings, with different implications for decision‐making; (3) both inattention to and fixation on “outliers” in the uncertainty distribution can lead the manager astray; and (4) the best QUA is one that helps discriminate among real options, that points to optimum pathways toward new information, and that spurs on the iterative search for new decision options that may outperform any of the initial ones offered.

Suggested Citation

  • Adam M. Finkel, 1994. "Stepping Out of Your Own Shadow: A Didactic Example of How Facing Uncertainty Can Improve Decision‐Making," Risk Analysis, John Wiley & Sons, vol. 14(5), pages 751-761, October.
    • Handle: RePEc:wly:riskan:v:14:y:1994:i:5:p:751-761
    DOI: 10.1111/j.1539-6924.1994.tb00285.x
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    1. John S. Evans & John D. Graham & George M. Gray & Robert L. Sielken, 1994. "A Distributional Approach to Characterizing Low‐Dose Cancer Risk," Risk Analysis, John Wiley & Sons, vol. 14(1), pages 25-34, February.
    2. Kimberly M. Thompson & David E. Burmaster & Edmund A.C. Crouch3, 1992. "Monte Carlo Techniques for Quantitative Uncertainty Analysis in Public Health Risk Assessments," Risk Analysis, John Wiley & Sons, vol. 12(1), pages 53-63, March.
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    Cited by:

    1. Branden B. Johnson, 2008. "Public Views on Drinking Water Standards as Risk Indicators," Risk Analysis, John Wiley & Sons, vol. 28(6), pages 1515-1530, December.
    2. Branden B. Johnson & Caron Chess, 2003. "How Reassuring are Risk Comparisons to Pollution Standards and Emission Limits?," Risk Analysis, John Wiley & Sons, vol. 23(5), pages 999-1007, October.
    3. Kimberly M. Thompson, 2002. "Variability and Uncertainty Meet Risk Management and Risk Communication," Risk Analysis, John Wiley & Sons, vol. 22(3), pages 647-654, June.

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