Economists over the years have had a schizophrenic attitude toward low probability but highly costly events. One school of thought argues that most people give less attention to such events than is merited, and that this explains why many households do not to take out flood, earthquake, and other insurance on very small risks (although there may be other explanations of this fact). Some psychologists and economics claim the opposite, that people give too much attention to low probability events, as in much of modern behavioral economics.
Whether BP paid enough attention to the chances of and damages from a serious leak on its Deepwater Horizon rig in the Gulf of Mexico is at the heart of any evaluation of whether BP was negligent in its safety approaches to this well. The chief executive of BP, Tony Hayward, claimed that an accident of the magnitude of this one had “a one in a million” chance. It is ironic that when Hayward became chief executive, he vowed to focus “like a laser” on safety and reliable operations.
