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Farmers' Risk-Based Decision Making Under Pervasive Uncertainty: Cognitive Thresholds and Hazy Hedging

Kieran M Findlater, Terre Satterfield, Milind Kandlikar
Risk Analysis: An Official Publication of the Society for Risk Analysis 2019 March 4
Researchers in judgment and decision making have long debunked the idea that we are economically rational optimizers. However, problematic assumptions of rationality remain common in studies of agricultural economics and climate change adaptation, especially those that involve quantitative models. Recent movement toward more complex agent-based modeling provides an opportunity to reconsider the empirical basis for farmer decision making. Here, we reconceptualize farmer decision making from the ground up, using an in situ mental models approach to analyze weather and climate risk management. We assess how large-scale commercial grain farmers in South Africa (n = 90) coordinate decisions about weather, climate variability, and climate change with those around other environmental, agronomic, economic, political, and personal risks that they manage every day. Contrary to common simplifying assumptions, we show that these farmers tend to satisfice rather than optimize as they face intractable and multifaceted uncertainty; they make imperfect use of limited information; they are differently averse to different risks; they make decisions on multiple time horizons; they are cautious in responding to changing conditions; and their diverse risk perceptions contribute to important differences in individual behaviors. We find that they use two important nonoptimizing strategies, which we call cognitive thresholds and hazy hedging, to make practical decisions under pervasive uncertainty. These strategies, evident in farmers' simultaneous use of conservation agriculture and livestock to manage weather risks, are the messy in situ performance of naturalistic decision-making techniques. These results may inform continued research on such behavioral tendencies in narrower lab- and modeling-based studies.


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