I am in the process of getting myself familiar with the literature of "extreme risks," that is, risk with small probability but high impact. Examples include species extinction, biological invasion with high impacts, earthquakes, and terrorist attacks such as 911.
I found this line of psychological literature on a description-experience gap, which explains why such extreme risks are "either overweighted or neglected (Kahneman and Tversky (Econometrica 47:263-291, 1979))" and the abstract of this much-cited paper says it all,
"When people have access to information sources such as newspaper weather
forecasts, drug-package inserts, and mutual-fund brochures, all of
which provide convenient descriptions of risky prospects, they can make
decisions from description. When people must decide whether to back up
their computer's hard drive, cross a busy street, or go out on a date,
however, they typically do not have any summary description of the
possible outcomes or their likelihoods. For such decisions, people can
call only on their own encounters with such prospects, making decisions
from experience. Decisions from experience and decisions from
description can lead to dramatically different choice behavior. In the
case of decisions from description, people make choices as if they
overweight the probability of rare events,
as described by prospect theory. We found that in the case of decisions
from experience, in contrast, people make choices as if they
underweight the probability of rare events,
and we explored the impact of two possible causes of this
underweighting-reliance on relatively small samples of information and
overweighting of recently sampled information. We conclude with a call
for two different theories of risky choice."
P.S. A 2011 PLOS paper shows that the gap also exists for non-extreme risks.