Yes. Imagine someone who accepts a risky bet, but avoids risking his savings when he goes through difficulties.
At first glance, it seems like a contradiction. However, accepting uncertainty when we have sufficient resources is not the same as doing so when a loss would exacerbate a problem. Let’s think about a person who buys a lottery ticket for fun, but refuses to invest the money reserved for rent in an unpredictable operation. Your reaction depends on what is at stake and the circumstances. It also influences how much we can afford to lose and whether we have enough resources to recover later.
In economics, taking risks and being prudent are not exactly the opposite. Prudence consists of preventing new uncertainty from adding to a situation that is already unfavorable.
Economists distinguish both attitudes through hypothetical decisions with different rewards, losses and probabilities. Risk aversion describes how much we prefer a certain amount over an uncertain one. Prudence is manifested when we seek to reserve resources or reduce additional exposure to potential setbacks. Therefore, someone can engage in risky activities and at the same time protect themselves against an unexpected expense.
To appreciate the difference, we can compare two decisions of the same person. Suppose you are offered a choice between collecting twenty euros for sure or flipping a coin to get forty if it comes up heads and nothing if it comes up tails. The two options give the same average amount if we repeat the choice many times. If you choose to flip the coin, only one of the two possible outcomes will give you money.
Now let’s imagine that you have a repair pending and you still don’t know how much it will cost you. Although the prize and the odds of the game remain the same, running out of those twenty euros can weigh more if the bill is high. Comparing how you choose with and without that uncertain expense allows you to see if a risk that already exists changes your willingness to take on another.
A study of 658 adolescents separately measured how much risk they tolerated and how they reacted to different situations of uncertainty. The researchers found that this prudence helped explain decisions about health, prevention and money that simple risk tolerance did not explain well.
This suggests that labeling a person as reckless or cautious may mask important differences. Two teenagers could accept similar bets and still make different decisions when there is the possibility of additional negative consequences. The results also show associations between measured preferences and observed behaviors, but do not imply that a characteristic alone determines each choice.
The distinction also serves to understand why two decisions that seem equally risky from the outside can respond to different circumstances. If one person has room to deal with an unforeseen event and another has a tight budget, the same outlay may only force the second person to give up something they need. A single choice offers little information about how that person would act if his or her resources change or other unforeseen expenses arise.
So it doesn’t just matter how much risk we accept, but also when we decide to take it.
REFERENCES
Ern Wong, Tobias U. Hauser, Aswath Chandrasekaran, Pietro Pietrini, and Charley M. Wu. “Stimulation uncertainty reveals distinct mechanisms of sensation seeking and impulsivity.” Communication PsychologyOctober 23, 2026.
Sebastian O. Schneider and Matthias Sutter. “Risk Preferences and Field Behavior: The Relevance of Higher-Order Risk Preferences.” American Economic ReviewJanuary 2026.
