What is Risk Literacy?
Risk literacy refers to one's practical ability to evaluate and understand risk in the service of skilled and informed decision making. In some ways our ability to understand risk depends on external factors like the design of risk communications (e.g., simple visual aids can promote or bias risk comprehension). In other ways risk literacy depends on specific skills and abilities. For example, one’s practical understanding of mathematics (i.e., numeracy especially statistical numeracy) tends to be the strongest single predictor of risk literacy and general decision making skill (for a recent review see Skilled Decision Theory; Cokely et al., 2017). In part this is because math is the language of risk and science.* The statistical aspects of numeracy are essential features of risk assessment in health, business, and engineering. Statistical information plays some role in virtually all formal risk analyses and risk communications. These statistical numeracy skills are also among the most influential educational factors associated with economic prosperity in industrialized countries. Nevertheless, the psychology of skilled decision making isn’t about cold calculation or simply "doing the math". Skilled decision making generally involves identification and integration of complex trade-offs, risks, rewards, etc., in the context of deeply held personal values and responsibilities. In addition to mathematical competency, skilled and informed decision making rely on (1) heuristic deliberation and representative understanding (e.g., Skilled Decision Theory; Cokely et al., 2012; 2017; Gigerenzer et al., 1999; 2012); (2) integrated emotional and analytic thinking (e.g., precise affect; Peters et al., 2006); and (3) meaningful intuition (e.g., fuzzy-gist representation; Reyna et al., 2009). Risk literacy promotes skilled and informed decision making by helping people understand and evaluate risk and reward.
* In July of 1654 Blaise Pascal began corresponding with Pierre de Fermat about the division of stakes in a game of chance (i.e., gambling), and how best to formally interpret risk and reward in this context (i.e., "Problem of Points"). Although this was not the first attempt to systematize chance, these exchanges became the founding documents of mathematical probability theory, which is at the heart of modern science and risk analysis.
* The word "risk" has many uses (e.g., exposure to danger and loss; variability in probability distributions; the effect of uncertainty on objectives). Since 1921 the psychology of economic decision making and risk has been formally connected to probabilistic and quantitative thinking.
** "The great body of physical science, a great deal of the essential fact of financial science, and endless social and political problems are only accessible and only thinkable to those who have had a sound training in mathematical analysis, and the time may not be very remote when it will be understood that for complete initiation as an efficient citizen of one of the great complex world-wide States that are now developing, it is as necessary to be able to compute, to think in averages and maxima and minima, as it is now to be able to read and write."
- Mankind in the Making, H.G. Wells (p. 204, 1903)