NATS 1760 Lecture Notes - Lecture 8: Numeracy, Vehicle Insurance, Life Insurance
17 Nov 2018
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Document Summary
Science and numbers: science has given us the ability to predict and control the world, scientific theory can be used to tell how nature is going to behave, nature is complex, so predictions are rarely straightforward. There is no certainty that something will happen: human beings are bad at estimating risk. They tend to overestimate certain kinds of risk and underestimate others (ex. smoking: technical knowledge can also lower estimates of risk, if you know how something works, you are less likely to be scared of it. It will change your perception of risk: we overestimate the intensity and the duration of our emotional reactions so we overestimate the risks of certain choices. ex. losing a job. Betting: for many, the first thought about risk is centered on betting, knowing the odds success in a monetary wager, investment is another form of betting.
