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Is risk the best policy?

Stephen White and Alan Smith

 

Ever run out of gas?

Well it seems that more and more of us have. Last year over 800,000 motorists reportedly ran dry.  Research shows the number running out of gas has risen every year since 2011, when the figure was a third lower. Men made up most of the 827,000 who ignored or chanced their arm when the fuel warning light came on.

 Are we becoming more risk friendly, foolish or price sensitive?

Short answer all 3

Almost a million motorists admitted that they tend to either ignore the fuel light or don’t notice it is on, says the report. And more than two million admit they drive with their warning light on nearly constantly.

The LV= report says a ‘significant’ proportion of drivers overestimate how much fuel they have left in the tank. One in four (24 % ) believe they can drive for more than 40 miles after the light has illuminated. But the report notes: ‘The truth is if they were driving half of the UK’s most common car models, they would run out and break down.’

The LV= report also notes: ‘With fuel proving an expensive part of the family budget, many drivers are prepared to gamble on passing an expensive gas station – particularly on an Interstate– in the hope of finding a cheaper fill-up further down the road.’

So whether you run out of fuel or not to a large extent depends on your attitude to risk and the potential rewards for that risk. People seem more likely to take the risk when price differential is high. When on Interstates the reward is certainly a much better price differential. That also seems to be the most likely place that you will run out.

The risk associated with shifting supply, region or running on empty will be a major factor in deciding to make a change, and even if there is a differential provided it is not massively significant that may not be enough to generate the desire to move. But if the reward is higher?

Think of the massive risks that many Syrian refugees are taking looking for a better life for themselves and their children. Running out of fuel is nothing compared to the distance, uncertainties and challenges that many refugees face on their way to Europe.

European leaders may care to ponder that refugees are far from being just a burden to taxpayers, but can bring great benefits. We also have a legal and moral responsibility to assist refugees. We are legally obliged to do so by the Refugee Convention and by the historical precedent. Europe and its people once benefitted enormously from others’ openness, think of the number of Europeans who migrated to America and Australia after the Second World War  – now maybe it’s our time to open up Europe’s borders.

Interesting that the biggest issue for owners of all-electric cars is ‘range anxiety’ – the psychological effect of the risk of running out of battery charge completely.  Because, unlike a gas car, if it happens you are genuinely stuffed. The only remedy is to call a tow truck and get moved to a charging point, which might be miles away, and then wait for the car computer to reboot the car, and then hours for it to charge. So the electric car forums are full of helpful advice about how much battery reserve you should calculate into your travel plans, and drivers become increasingly conservative (“I plan to have a minimum excess of 50 miles when I reach my destination” is a typical comment).

So, the lesson seems to be that when the cost of failure is genuinely high people become risk averse. Or, to put that statement in reverse, when the cost of failure is high (losing your life on a boat) and people still take the risk (deciding to make the journey anyway), then the risk of remaining at the status quo (living in Syria) must be truly horrendous.

We must be prepared to reward the risk that those poor people have made. As one father pleaded to the camera on the BBC news last night, “are we not human too?”

Stephen White and Alan Smith

Stephen White and Alan Smith
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