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January 21, 2009

Comments

kinglear

It's presumably why, as a young person, one is idealistic and "Leftish". As you get older you discover than, actually, being "Rightish" works better - it's what you find out has worked in the past. It's one of the reasons I worry about Obama - if he really does change things, will it necessarrily be for the better?

The Pedant's Apprentice

“red’s on a role tonight” may be a spelling bias rather than a cognitive bias.

Will

Kinglear, I think you've fallen into the Pipe and Slippers Fallacy. Age is no predictor of politics: there are too many braying young hoorahs and grizzled old communists in the world for the theory of inevitable rightward drift to hold water case by case.

ajay

Over-confidence, wishful thinking and the self-serving bias can give us the impetus to undertake risky projects. As a result, people start new businesses, write books and go into the music business in more numbers than rationality dictates.
But the result of this is that society is better off; we get new businesses and products, and more books and music than we would in a rational world. And it’s quite possible that the benefits to the successful outweigh the losses of the unsuccessful.

If the benefits outweighed the losses, it would be rational to write the book, wouldn't it?

chris

Pedant - ta, correction made.
Ajay - yes, I was a little vague there. I think I was hinting partly at the fact that there are huge externalities to innovation (see Nordhaus), so the irrationality benefits society if not the individual. I was also hinting at the fact that the probability of failure is high, even if the rewards for success are big. Whether this makes the venture rational depends upon attitudes to risk.

Alex

Niall Ferguson is exhibit A. His success wasn't in spite of his spectacular wrongness on important topics; it was because he was wrong in the right way at the right time.

Russell

I think Ferguson is kind of correct on this point.

We do have all sorts of cognitive biases, and most of them evolved in a much simpler world than the one we currently inhabit. They served us very well as a species, and still do to some extent. But they also hurt us a great deal in certain domains (see banking and complex derivatives trading).

Heuristics are useful for yes/no questions, and when the payoffs are not complex. But they kill us when the answers are complex and the payoffs are complex (again see banking and watch the herd follow VaR models until they all fell off the cliff).

So if we're just counting wins v. losses, then yes, heuristics are good (and help to explain the success of the human species), but when things get more complex heuristics are really bad (really really bad). And the impacts of screwing up the global financial system are much more grave than the positives of using heuristics to figure out who is favored in the next footie match.

dirigible

Biases can produce *fast* answers, which if statistically correct can give an evolutionary advantage.

They don't have to produce correct, meaningful or good answers. And it is a cognitive bias to expect that they should have to do so. ;-)

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