ELEMENTS IN THE CHOICE PROCESS
People who have been observed coping with risk and uncertainty in the environment appear to take account of likely economic out-comes, as is suggested in the case of the Bengal fisherman—but the resulting behavior rarely conforms to what should be optimum by
their standards of utility. They do not seem to maximize consistently the expected gains of their actions. It is easy to point outsome of the difficulties encountered in canvassing the elements, asdiagrammed in Figure 4.1. They cannot appraise the magnitude and frequency of extreme events—states of nature—with accuracy. Hydrologists and climatologists themselves have trouble estimat-ing a great drought or recurrence of strong winds. People are rarely aware of all the alternatives open to them. They differ greatly in the way they judge the consequences of particular actions even on the rare occasions when the physical outcomes are known accurately. The comparison of many different conse-quences is a highly complex operation for a decision analyst armed with precise data and a computer, let alone for a farmer choosing a crop as the rainy season approaches. A bounded rationality model that comes close to outlining how people in fact behave is likely to be far more complex. The most elaborate attempt to do so is that by Kates (1971)/ but in a model that has not been tested in a rigorous fashion. It can be simplified by extracting four elements that are noted frequently in field observations and by defining the points at which particular factors in some cases are known to play a signifi-cant part in the decision. An elementary scheme (shown in Figure 4.2), drawing from many previous analyses of decision making (Slovic et al., 1974), suggests that the individual (1) appraises the probability and magnitude of extreme events, (2) canvasses the range of possible alternaåve actions, and after (3) evaluating the consequences of selected actions, (4) chooses one or a combination of acüons. Both field observations and psychological laboratory work would indicate that the appraisal of extreme events and the canvass of alternaåves are interdependent, and that people have difficulty evaluaång more than a very small number of alternatives at one time. There also is reason to believe that people tend to deal with
alternaåves in an ordered sequence rather than simultaneously (Kunreuther, 1974). It is essentially a process of information flow and interpretation, one that may work in a rudimentary fashion, taking many shortcuts, or may be intricate and convoluted. In any circumstance the individual selects and weighs information from
natural systems to arrive at judgments as to the "state of nature" and as to which state is desirable and practicable of attainment.