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Comment author: Lumifer 14 June 2017 03:04:24PM 0 points [-]

The formatting is broken: the text of the indented paragraphs extends beyond the right margin.

perhaps existential riskologists could benefit from looking at the insurance industry

Well, the insurance industry is mostly concerned with pricing risks. Most of its money is allocated to diversifiable risk that we understand very well -- life, fire, accidents, etc. Even for pretty-common-but-not-too-frequent risks like hurricanes, the insurance industry's record is mixed: a single bad hurricane season can lead to large losses (and a good one can lead to large profits, of course).

For unique, poorly-estimable risks the insurance industry had strong incentive to overprice them and so its estimates should not be considered unbiased.

Comment author: fortyeridania 15 June 2017 07:21:24AM 0 points [-]

The formatting is broken

Fixed, thanks.

For unique, poorly-estimable risks the insurance industry had strong incentive to overprice them

Plausible, and one should certainly beware of biases like this. On the other hand, given conventional assumptions regarding the competitiveness of markets, shouldn't prices converge toward a rate that is "fair" in the sense that it reflects available knowledge?

Lloyd's of London and less-than-catastrophic risk

2 fortyeridania 14 June 2017 02:49AM

I recently found that Lloyd's has a number of interesting resources on risk. One is the City Risk Index, the methodology for which comes from Cambridge's Judge Business School.

The key metric is something they call GDP@Risk. Despite the name, it is not simply an application of Value@Risk to GDP. Instead, it is simply the sum of the expected damage from a given threat (or from a set of threats) during a given time period. In this case, the time period is 2015-2015. The threats considered include manmade ones (e.g., cyber attack, oil price shock) and natural ones (e.g., drought, solar storm). The site includes brief case studies for the threats. For example, the "plant epidemic" study focuses on the demise of the Gros Michel banana:

Event: Panama disease outbreak, 1950s

Location: Latin America

Economic cost: Estimated losses across Latin America were around $400m ($2.3bn today) although this figure does not include any of the economic losses caused by unemployment, abandoned villages and unrealised income in the affected region.

Description: The Fusarium oxysporum cubense fungus was first diagnosed in Panama but quickly travelled across Central America.

Damage: The disease wiped out the Gros Michel banana, the principal cultivar at the time, from plantations across the region. Between 1940 and 1960, around 30,000 hectares of Gros Michel plantations were lost in the Ulua Valley of Honduras, and in a decade 10,000 hectares were lost in Suriname and the Quepos area of Costa Rica.

Insight: Gros Michel was replaced in the 1960s by Cavendish, a variety thought to be resistant to the disease. However, a new strain of the pathogen was found to be attacking Cavendish plantations in Southeast Asia in the early 1990s. It has since spread, destroying tens of thousands of hectares across Indonesia and Malaysia, and costing more than $400m in the Philippines alone. There is concern that it could reach Central America and destroy up to 85% of the world’s banana crop. Solutions to contain the disease could include increasing genetic diversity among banana cultivars and developing hybrid varieties with stronger resistance.

As the name implies, the site quantifies risks from these threats at the city level. So which cities are the most at risk from a plant epidemic? They're all in APAC:

  • Hong Kong ($3.83b)
  • Shanghai ($2.89b)
  • Beijing ($2.38b)
  • Bangkok ($2.22b)
  • Jakarta ($2.09b)

These account for 1/6 of the plant-epidemic risk across all 301 cities ($75b).

Which cities are the most "at risk," all threats considered? Once again, APAC dominates, but with a different set of cities:

  • Taipei
  • Tokyo
  • Seoul
  • Manila
  • New York (not APAC of course)

This kind of information is interesting. It may even be useful as an approximate indication of where to focus risk mitigation efforts. But without more detail (probability distributions? second-order interaction effects? etc.) it's hard to see what role it would play in a serious risk analysis, existential or commercial or otherwise.

Coda: Despite their application to less-than-existential risks and the superficiality of this particular resource (it is a marketing tool for Lloyd's, after all), perhaps existential riskologists could benefit from looking at the insurance industry. Has this already been done?

Comment author: Lumifer 23 May 2017 07:50:15PM 2 points [-]

As a good heuristic, any time the headline ends with the question mark, in 90+% of the cases the answer is "No".

Comment author: fortyeridania 25 May 2017 03:12:24AM 1 point [-]
Comment author: fortyeridania 03 May 2017 04:01:39PM 0 points [-]

[Link] From Jonathan Haidt: A site that lets you "experience different viewpoints"

1 fortyeridania 03 May 2017 04:01PM
Comment author: fortyeridania 28 April 2017 01:30:05AM 1 point [-]

I know this is meant to be parody, but how closely does it resemble scenario analysis in the corporate world? From what I've read about the actual use of scenario analysis (e.g., at Shell), the process takes much longer (many sessions over a period of weeks).

Second, and more importantly: suits are typically not quants, and have a tendency to misinterpret (or ignore) explicit probabilities. And they can easily place far too much confidence in the output of a specific model (model risk). In this context, switching from full-on quant models to narrative models (as scenario analysis entails) can increase accuracy, or at least improve calibration. This is a classic "roughly right vs. precisely wrong" situation.

Comment author: fortyeridania 28 April 2017 01:04:51AM 0 points [-]
Comment author: fortyeridania 28 April 2017 01:04:11AM 1 point [-]

Authors: Ada C. Stefanescu Schmidt, Ami Bhatt, Cass R. Sunstein

Abstract:

During medical visits, the stakes are high for many patients, who are put in a position to make, or to begin to make, important health-related decisions. But in such visits, patients often make cognitive errors. Traditionally, those errors are thought to result from poor communication with physicians; complicated subject matter; and patient anxiety. To date, measures to improve patient understanding and recall have had only modest effects. This paper argues that an understanding of those cognitive errors can be improved by reference to a behavioral science framework, which distinguishes between a “System 1” mindset, in which patients are reliant on intuition and vulnerable to biases and imperfectly reliable heuristics, and a “System 2” mindset, which is reflective, slow, deliberative, and detailed-oriented. To support that argument, we present the results of a randomized-assignment experiment that shows that patients perform very poorly on the Cognitive Reflection Test and thus are overwhelmingly in a System 1 state prior to a physician visit. Assigning patients the task of completing patient-reported outcomes measures immediately prior to the visit had a small numerical, but not statistically significant, shift towards a reflective frame of mind. We describe hypotheses to explain poor performance by patients, which may be due to anxiety, a bandwidth tax, or a scarcity effect, and outline further direction for study. Understanding the behavioral sources of errors on the part of patients in their interactions with physicians and in their decision-making is necessary to implement measures improve shared decision-making, patient experience, and (perhaps above all) clinical outcomes.

[Link] Boundedly Rational Patients? Health and Patient Mistakes in a Behavioral Framework

0 fortyeridania 28 April 2017 01:01AM
Comment author: fortyeridania 20 April 2017 04:59:50AM 2 points [-]

For comparison, here are Robin Hanson's thoughts on some Mormon transhumanists: http://www.overcomingbias.com/2017/04/mormon-transhumanists.html

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