« Some feminist economics | Main | Equality vs big government »

July 09, 2012



"This is not the only way in which overconfidence might be rational:

- Overconfidence might be the only way of steeling oneself to take risky decisions, such as to start one's own business.

- Overconfidence can be mistaken for genuine skill. Being overconfident, then, is a good career strategy."

The second point is entirely correct, and represents a common form of bias in our assessment of others' competence. We believe in braggarts. The first point involves an unfounded tacit assumption. Starting one's own business must be an inherently good thing, with the goodness under-recognized, in order for deceiving one's self into taking a risk to start a business to be "rational".

Edward Harkins

So, an incompetent person has the confidence to believe that they have the skills to ensure that they are never irrational or mistaken… I think I know that person… in fact I think I know quite a lot of those people.


Hi Chris

I really enjoy your blog. Therefore, I must point out that "The "10 heads" answer is biased, but it has less variance (is less likely to be wrong) than (say) HHHTHHHTHH" is not true. P(10 heads) = 0.8^10 = 0.107. P(HHHTHHHTHH) = 0.8*0.8*0.8*0.2*0.8*0.8*0.8*0.2*0.8*0.8 =0.0067. Maybe I misunderstand your phrase "has less variance"?

Anyway, it probably doesn't affect your conclusion, which seems very very sensible.


Many apologies, I misread your article! Ignore me ;-)


You are playing fast and loose with terms like bias here. Ten head is by far the most likely individual outcome.

Precisely what do you mean when you say that answer has "bias"? Compared to what other model? The mean squared error, calculated how? Remember if you answer, that we were asked for a specific sequence prediction.

This bears no relation to the notion of bias/variance trade off discussed in your (excruciating) first link. And you (Bayesian, and therefore intelligent) second link author explains why that trade off is bollocks anyway.


My God that paper is mind-numbing! Do you actually read this stuff for pleasure? Gibberish!:

"The correct answer can be regarded as a random variable Y with Y = 1 if the
subject has choosen the correct answer."

Typical main stream economics/social science. Submerge total muddy headed and ill-defined confusion under thirty three metric shitloads of equations and hope nobody will notice.

For the record, when he says that it can be "rational" to be overconfident he doesn't mean anything of the kind.

He means that when asked to estimate probability of success, it may produce a lower mean squared error in certain situations to give a number above the mean actual probability. That is called bias. But it isn't overconfidence. It is the most reliable answer, defined in the experimenter's own terms of MSE, that the subject can give.


The only real point here is that the mean squared error uses....the mean average.

And that there are some distributions where you get a lower MSE if you bias your estimates away from the mean average, given certain assumptions about that average (Perhaps towards the median or mode).

That IS NOT the same as over or underconfidence, despite it being your pet cognitive bias.

The comments to this entry are closed.

blogs I like

Blog powered by Typepad