Thursday, January 31, 2008

I'm overconfident

I just finished reading SuperCrunchers, by Ian Ayres, and the big lesson I took away from it was that we're all more confident in our opinions than we should be.

There's a little 10-question quiz in the book, with questions like "what's the unloaded weight of a 747 airplane" and "how old was Martin Luther King, Jr. when he died." You're supposed to give a range of answers large enough that you're 90% certain that the right answer is in that range. 90% confidence on 10 questions means you should get 9 out of 10 correct. You can take the quiz online here to see how you do.

I got 3 out of 10, and I thought I was over-estimating the ranges. Shows you how much I know!

One of the points of SuperCrunchers is that experts are just like the rest of us-- they're overconfident, too. That's why mutual fund managers generally don't beat the stock market indexes, why we're in a stupid war in Iraq, and why medical errors kill so many people every year.

And that's part of why I'm mostly a libertarian. If I screw up and make a mistake because I'm overconfident the consequences aren't dire. When the government screws up and decides to subsidize ethanol production... people in Haiti resort to eating mud cookies because they can't afford to buy corn.


Jonathan said...

Yeah, so that's a pretty humbling quiz. 4/10, and I thought my ranges were way too big. I think the methodology is slightly flawed, though, in that there is no real incentive to place an upper bound on the size of the ranges. The trivial response to uncertainty is to leave huge margins of error. In theory, you could ace the quiz this way. But in practice, clearly, hubris wins out, leading to smaller ranges and, um, embarrassing results.

On the political consequences, remember that governments can screw up via inaction as well as by action.

Gavin Andresen said...

Yeah, we're really, really bad at being "90% confident." I don't think we're bred for that kind of thinking ("I'm 90% confident the lion won't eat me" isn't a good strategy for passing on your genes).

As for government inaction being bad sometimes: I agree, and that's why I'm not an Anarcho-Capitalist. We do need a government to enforce contracts, keep us from killing each other, etc...