## Subtitles section Play video

• Okay, I have a hypothetical situation for youand you need to make a choice.

• Listen carefully.

• Youve just visited the doctor and she told you youre going to die unless you get treated

• immediately.

• There are two treatments -

• The blue pill would give you a 100% chance of living another 12 years before dying, and

• the red pill would give you an 89% chance of living another 12 years, a 10% chance of

• living another 18 years and a 1% chance of sudden death.

• Which do you choose?

• Your regular doctor is out that day so you go to the slightly dodgier one next door,

• who offers you two other treatments:

• The green pill gives you an 11% chance of living 12 years before dying and an 89% chance

• of sudden death, and the yellow pill gives you a 10% chance of living a full 18 years

• before dying, with a 90% chance of sudden death.

• So, which one of these do you choose?

• So what did you base your decisions on?

• Behavioural economists think we make decisions based on something called expected utility

• it’s how much we expect that something will satisfy our wants and needs.

• If you like chocolate ice cream more than vanilla, youll feel more satisfied if you

• choose chocolate (in the animation both ice creams have cherries on top (I’ll come back

• to this)).

• So for you, chocolate ice cream has more expected utility.

• Studies show that in the previous question most people choose the blue pill in the first

• scenario, giving them a guarantee of living another 12 years, and the yellow pill in the

• second scenario, giving them a 10% chance of living another 18 years, and a 90% chance

• of death.

• But what if instead we write the options out like this:

• Now the options have something in common.

• In the first scenario, in both cases you have an 89% chance of living 12 years, so if we

• remove that, your decision shouldn’t change, right?

• Kind of like how removing a cherry from both ice creams won’t change your favorite flavor.

• In the second scenario, both options have an 89% chance of death in common, so we should

• be able to cancel those too without changing your decision.

• Hold on, now both scenarios are exactly the same.

• But studies showed that most people chose the blue pill in the first scenario and the

• yellow pill in the second one, which doesn’t make sense.

• Both the blue and green pills give you a higher chance of living over the chance of a longer

• life, and the red and yellow pills give you a chance of a longer life but with the drawback

• of a lower chance of living.

• So for people who chose the blue and yellow pills, what do they want?

• A higher chance of living or a longer life?

• This is called the Allais Paradoxit was first outlined by Maurice Allais, a Nobel-Prize

• winning economist in a 1953 article.

• The paradox undermines the theory of expected utility because it shows that we don't always

• make decisions that align with our wants and needs.

• We tend to make decisions based on how much we think we have to gain or lose now, rather

• than on the final outcome.

• And we also tend to choose certainty over risk, even if the riskier option is closer

• to what we really want.

• Psychologists who have studied the Allais Paradox found that people dislike risk in

• general.

• When questions are framed in terms of gains or losses, people are far more likely to consider

• the losses first and try to minimise themit’s a phenomenon called loss aversion.

• It’s similar to regret theory, which says that when were making decisions, some of

• us try to minimise the amount of regret we feel afterward.

• Humans are pretty complicated!

• And not everything is as simple as ice cream.

• So, what did you decide?

Okay, I have a hypothetical situation for youand you need to make a choice.

Subtitles and vocabulary

Click the word to look it up Click the word to find further inforamtion about it

B1 US chance pill living scenario paradox yellow

# This Paradox Could Kill You

• 169 14
Kristi Yang posted on 2017/09/29
Video vocabulary