And many of the solutions are surprisingly simple. Perhaps the most serious mistake that people make is the failure to distinguish known risk from uncertainty. We are dealing with known risk when all of the possible outcomes are known and the probability of each outcome can be computed. Otherwise, we are dealing with uncertainty-a very different kind of thing.
Gerd Gigernzer is an unapologetic German who seems to be on a mission to expose the unethical use of language and misleading statistics that confuse not only ordinary people but also the professionals and “experts” who unwittingly end up peddling profitable narratives for big industries – mainly pharmaceutical / medical and financial. At the same time, he comes across as unbiased, which I think adds to his credibility and illustrates his desire to educate for the greater good.
Availability heuristic – A mental shortcut that occurs when people make judgments about the probability of events by the ease with which examples come to mind. Gigerenzer received his PhD from the University of Munich in 1977 and became a professor of psychology there the same year. In 1984 he moved to the University of Konstanz and in 1990 to the University of Salzburg. From 1992 to 1995 he was Professor of Psychology at the University of Chicago and has been the John M. Olin Distinguished Visiting Professor, School of Law at the University of Virginia. In 1995 he became director of the Max Planck Institute for Psychological Research in Munich.
The other chapters are a little more hit and miss, I think. From my layperson’s perspective, one way to think about how to situate this book would be that classical economic theory assumes a rational actor that will always maximize utility, Tversky and Kahneman point that we don’t maximize utility due to our various biases (i.e. we’re often irrational), and Gigerenzer argues that they’re all using a definition of rationality that does not actually apply in a complex, uncertain world where we often need to make decisions under time pressure and with limited information (i.e. seeking utility maximization may not actually be rational in terms of achieving hoped for real world outcomes).
It also provides the tools we need to move toward a risk-savvy society. Apart from author’s reasoning about the gut heuristics, which is really interesting, the book has some other good material on risk, uncertainty and probabilities.
Is anyone else struggling to understand Gigerenzerâ€™s point about regression towards the mean, with respect to risk estimation? Regression to the mean is a consequence of X and Y-X being negatively correlated if X and Y are independent, right?
Paradoxes of Human Decision Making
In addition, humans use social rationality, which is a special case of ecological rationality. Humans can speed up decision making by using heuristics that are socially endorsed (e.g., â€œEat what your peers eat.â€ ). These explanations help us understand why people take shortcuts, use heuristics (e.g., peripheral cues), and tend not to verify information. In addition, previous research has shown that Internet users are concerned with the credibility of Web information.
They proved analytically conditions under which semi-ignorance (lack of recognition) can lead to better inferences than with more knowledge. These results were experimentally confirmed in many experiments, e.g., by showing that semi-ignorant people who rely on recognition are as good as or better than the ATP Rankings and experts at predicting the outcomes of the Wimbledon tennis tournaments.
With a higher risk (e.g., 10 percent), some research hypotheses would have been supported. Nonetheless, this study contributes to credibility research concerning Wikipedia for the following aspects. First, the study revealed that students, indeed, used various peripheral cues of Wikipedia when they were uncertain about the believability of Wikipedia articles. Second, this study first attempted to understand non-verification behavior and offered some new insights into understanding non-verification information behavior by employing the theory of bounded rationality, despite only partially confirming the theory.
Other researchers in the field of behavioral economics have also tried to explain why human behavior often goes against pure economic rationality. The theory of bounded rationality holds that an individualâ€™s rationality is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision. This theory was proposed by Herbert A. Simon as a more holistic way of understanding decision-making. Bounded rationality shares the view that decision-making is a fully rational process; however, it adds the condition that people act on the basis of limited information. Because decision-makers lack the ability and resources to arrive at the optimal solution, they instead apply their rationality to a set of choices that have already been narrowed down by the absence of complete information and resources.
Introduction: Taking heuristics seriously
both expertise and trustworthiness may be equally important in credibility judgments. Based on Riehâ€™s (2010) definition and the credibility literature, this study defines credibility as an individualsâ€™ assessment whether information is believable based on their knowledge, experience and situations. The mid-17th century heralded one of the greatest intellectual revolutions – the so-called probabilistic revolution – which has changed science and everyday life, from statistical mechanics to baseball statistics.
Where an exhaustive search is impractical, heuristic methods are used to speed up the process of finding a satisfactory solution. The rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision. Bounded rationality is the idea that an individualâ€™s ability to act rationally is constrained by the information they have, the cognitive limitations of their minds, and the finite amount of time and resources they have to make a decision. The examples were meant to show that humans have had plenty of time to develop techniques to analyze situations systematically on behalf of a risk management and long term thinking agenda.
Also I believe one current theory on Egyptian pyramids was that they were a social services system rather than slave labor. The Pharaoh paid people wages during dry periods thereby stabilizing peopleâ€™s living situations while they awaited the cyclical Nile floods that made the lowlands fertile for growing. FWIW, Iâ€™ve always thought that a paragraph like â€œDisease X has a base rate of 0.1.