Drug war fear and loathing in Mexico provided University of Colorado Denver researchers with some critical new evidence on how fear does severe harm to a nation:
â€¦Previous research on risk preferences has relied on data gathered only after a violent event, and found insecure environments made residents either more risk tolerant or had no effect at all.
But this new study, Impact of Violent Crime on Risk Aversion: Evidence from the Mexican Drug War, published in the Review of Economics and Statistics, found the opposite is true. By also using data collected before the rise in crime, it found that fear had a profound effect on the residents, leading them to express more cautious attitudes toward risk. This change has the potential to have a widespread and long-lasting impact on the economy, as risk tolerance is associated with opening a business, investing in education and migrating to greater opportunities. [â€¦]
[Ryan] Brown and his team [VerÃ³nica Montalva, Duncan Thomas and Andrea VelÃ¡squez] found â€¦ an increase of one homicide per 10,000 people increased the likelihood of being in the longitudinal study’s most risk-averse category by 5 percent. Uniquely, the researchers provided evidence that this relationship was predominately caused by an increase in feelings of fear. [â€¦]
“We understood why being in an insecure environment would change your risk preferences, but until now, we didn’t know the mechanisms behind it,” said Brown. â€œThis study allows us to rule out the policy mechanism; that improving access to health care, the economic environment or mental health will make a difference.â€
Instead, we’re left with a much more difficult question: How do you fix fear?”
Donald Trump believes he can fix fear by constructing a wall on the US southern borderâ€”giving rise to fears a wall might actually get built.