Possible Insight

Posts Tagged ‘Psychology

Must Read Paper On Overconfidence

with 2 comments

Via the indispensable Tyler Cowen, a new paper from Johnson and Fowler explores whether overconfidence is, in fact, adaptive. They show that it it is under some very reasonable assumptions.  They model competition for resources as a two-player game and then analyze the evolutionary dynamics of populations playing this game.

The basic result is that overconfidence is beneficial in proportion to two factors: (1) the size of the payoff relative to the cost to play and (2) uncertainty about competitor capabilities.  There are two optimal strategies for a population, overconfidence (which minimizes unclaimed resources) and underconfidence (which minimizes conflict costs).  Unbiased self-perception is always dominated by these strategies. However, an overconfident person can successfully invade an underconfident population while the reverse is not true.  So overconfidence is the stable solution.

The direct implication is that resources get destroyed.  It is optimal for an individual to be overconfident, but then he ends up fighting with other overconfident individuals, which imposes costs.  If you think about it for a minute, this is a pretty important fundamental problem.  All of the big societal decisions we face have potentially big payoffs (or avoidance of costs), but it’s really unclear who has the best expertise to make a recommendation.  So we get a bunch of “experts” telling us they are absolutely right.

Note that if it is public knowledge how “good” someone is, the “overconfidence premium” goes to zero.  This is why forcing experts to make public predictions is so important.  Then you can figure out how good they really are.

Written by Kevin

September 24, 2009 at 8:27 pm

Fantastic Book on Terrorist Interrogation

with one comment

Thanks to a pointer from Sandeep Baliga over at Cheap Talk, I recently Kindled Matthew Alexander’s How to Break a Terrorist. If this were a novel, it would be in the top 10% of thrillers I’ve read in the last 5 years.  But it’s a true story.

Read the rest of this entry »

Written by Kevin

June 9, 2009 at 12:17 pm

Posted in Government

Tagged with ,

Two Books On Cognitive Science You Should Read

with 9 comments

As I mentioned in this post, one of the three primary planks of my worldview is that, “…the human brain is a woefully inadequate decision making substrate.” I started adopting this posture in graduate school and have refined it with constant input from the cognitive psychology and neurobiology literature over the years.  Luckily, you don’t have to put in that kind of time. Simply go out and read Rational Choice in an Uncertain Worlds by Hastie and Dawes and The Accidental Mind by Linden.

Read the rest of this entry »

Written by Kevin

March 17, 2009 at 10:05 am

Posted in Science, Society

Tagged with , ,