Psychological Influences on Personal Probability

1. Psychological Influences on Personal Probability Instinct or analysis? Wouldn't things be easier if we could get emotion out of the way and let rational analysis lead? Except that so often, that gut feeling turns out to be right. Antoine Bechara, a psychology professor at USC, tells us about the case of Elliot,an accountant who, after having a tumor removed from his brain, became entirely rational. - Listen The term intuition is used to describe "thoughts and preferences that come to mind quickly and without much reflection". Intuition (is) perception via the unconscious– Carl Gustav Jung(1875 – 1961), was a Swiss psychiatrist, an influential thinker, and the founder of analytical psychology INTUITION may be defined as understanding or knowing without conscious recourse to thought, observation or reason. Some see this unmediated process as somehow mystical while others describe intuition as being a response to unconscious cues or implicitly apprehended prior learning.– Dr. Jason Gallate & Ms Shannan Keen BA

2. Psychological Influences on Personal Probability Thought Question s 1. Which is a more likely cause of death in the United States, homicide or diabetes? How did you arrive at your answer? 2. Do you think people are more likely to pay to reduce their risk of an undesirable event from 95% to 90% or to reduce it from 5% to zero? Personal probabilities: values assigned by individuals based on how likely they think events are to occur. Equivalent Probabilities, Different Decisions Certainty Effect: people more willing to pay to reduce risk from fixed amount down to 0 than to reduce risk by same amount when not reduced to 0. Example: Buying a new car. Salesperson explains that you can purchase an optional safety feature for $200 that will reduce your chances of death in a high speed accident from 50% to 45%. Would you be willing to purchase the device? Same price but reduces the risk from 5% to zero. Would you be willing to purchase the device? PseudocertaintyEffect: people more willing to accept a complete reduction of risk on certain problems and no reduction on others than to accept a reduced risk on a variety (all) problems.

3. Psychological Influences on Personal Probability How Personal Probabilities Can Be Distorted • Representativeness heuristic leads people to assign higher probabilities than warranted to scenarios that are representative of how we imagine things would happen. • This leads to what is called the conjunction fallacy … when detailed scenarios involving the conjunction of events are given higher probability assessments than statements of one of the simple events alone. • Rule 4: The probability of two events occurring together, in conjunction, cannot be higher than the probability of either event occurring alone. • Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in antinuclear demonstrations. • Respondents asked which of two statements was more probable: • Linda is a bank teller. • Linda is a bank teller who is active in the feminist movement. • Frequency Format versus Probability form • Now let us change the question slightly without changing the description of Linda: • Imagine women who fit the description of Linda • How many of these women are bank tellers? • How many of these women are bank tellers and active in the feminist movement?

4. Psychological Influences on Personal Probability Anchoring and adjustment heuristic Anchoring and adjustment is a psychological heuristic that influences the way people intuitively assess probabilities. According to this heuristic, people start with an implicitly suggested reference point (the "anchor") and make adjustments to it to reach their estimate. A person begins with a first approximation (anchor) and then makes adjustments to that number based on additional information. The anchoring and adjustment heuristic was first theorized by Tversky and Kahneman. In one of their first studies, the two showed that when asked to guess the percentage of African nations which are members of the United Nations, people who were first asked "Was it more or less than 10%?" guessed lower values (25% on average) than those who had been asked if it was more or less than 65% (45% on average).The pattern has held in other experiments for a wide variety of different subjects of estimation. Others have suggested that anchoring and adjustment affects other kinds of estimates, like perceptions of fair prices and good deals. Some experts say that these findings suggest that in a negotiation, participants should begin from extreme initial positions. As a second example, an audience is first asked to write the last two digits of their social security number and consider whether they would pay this number of dollars for items whose value they did not know, such as wine, chocolate and computer equipment. They were then asked to bid for these items, with the result that the audience members with higher two-digit numbers would submit bids that were between 60 percent and 120 percent higher than those with the lower social security numbers, which had become their anchor.

5. Psychological Influences on Personal Probability How Personal Probabilities Can Be Distorted The focusing effect (or focusing illusion) is a cognitive bias that occurs when people place too much importance on one aspect of an event, causing an error in accurately predicting the utility of a future outcome. People focus on notable differences, excluding those that are less conspicuous, when making predictions about happiness or convenience. Example: When people were asked how much happier they believe Californians are compared to Midwesterners, Californians and Midwesterners both said Californians must be considerably happier, when, in fact, there was no difference between the actual happiness rating of Californians and Midwesterners. The bias lies in that most people asked focused on and overweighed the sunny weather and ostensible easy-going lifestyle of California and devalued and underrated other aspects of life and determinants of happiness, such as low crime rates and safety from natural disasters like earthquakes (both of which large parts of California lack). A rise in income has only a small and transient effect on happiness and well-being, but people consistently overestimate this effect. Kahnemanproposed that this is a result of a focusing illusion, with people focusing on conventional measures of achievement rather than on everyday routine.

6. Psychological Influences on Personal Probability How Personal Probabilities Can Be Distorted The Availability Heuristic • Tversky and Kahneman note that “there are situations in which people assess the . . . probability of an event by the ease with which instances or occurrences can be brought to mind. . . . This judgmental heuristic is called availability.” • 1. Which do you think caused more deaths in the United States in 2000, homicide or diabetes? • Most answer homicide. The actual death rates were 6.0 per 100,000 for homicide compared with 24.6 per 100,000 for diabetes (National Center for Health Statistics). • Distorted view that homicide is more probable results from the fact that homicide receives more attention in the media. • 2. Imagine the following scenarios and estimate their odds: • A massive flood somewhere in America in which more than a thousand people die. • An earthquake in California, causing massive flooding, in which more than a thousand people die. • 3. The death of a relative in a motorcycle accident is far more likely to influence your attitude • than any statistics on motorcycleaccidents

7. Psychological Influences on Personal Probability IAT: "The Problem is Really in the Environment" Malcolm Gladwell, author of "Blink", & Dr. Anthony Greenwald, psychologist at the University of Washington, discuss the race-based Implicit Association Test and why some people show an unconscious bias in favor of White people over Black people. – Link Implicit Association Test It is well known that people don't always 'speak their minds', and it is suspected that people don't always 'know their minds'. Understanding such divergences is important to scientific psychology. This web site presents a method that demonstrates the conscious-unconscious divergences much more convincingly than has been possible with previous methods. This new method is called the Implicit Association Test, or IAT for short. Race ('Black - White' IAT). This IAT requires the ability to distinguish faces of European and African origin. It indicates that most Americans have an automatic preference for white over black. – Link

8. Psychological Influences on Personal Probability Optimism, Reluctance to Change, and Overconfidence Optimism Slovic and colleagues (1982, pp. 469–470) note that “the great majority of individuals believe themselves to be better than average drivers, more likely to live past 80, less likely than average to be harmed by the products they use, and so on.” Example: Optimistic College Students On the average, students rated themselves as 15 percent more likely than others to experience positive events and 20 percent less likely to experience negative events. Reluctance to Change The reluctance to change one’s personal-probability assessment or belief based on new evidence. Example: Reluctance of the scientific community to accept new paradigms or to examine compelling evidence for phenomena such as extrasensory perception. “There seems to be a strong need on the part of conventional science to exclude such phenomena from consideration as legitimate observation. Kuhn and Feyerabend shoed that it is always the case with “normal” or conventional science that observations not confirming the current belief system are ignored or dismissed . The colleagues of Gallileo who refused to look through his telescope because they “knew” what the moon looked like are an example”. – Hayward (1984)

9. Psychological Influences on Personal Probability Overconfidence The tendency for people to place too much confidence in their own assessments. When people venture a guess about something for which they are uncertain, they tend to overestimate the probability that they are correct. Example – Excerpt from “The Black Swan – The Impact of the Highly Improbable” Take a room full of people. Randomly pick a number. The number could correspond to anything: The sales of a particular book during the months with r in them, the average IQ of Columbia students, the population of Rajastan. Ask each person in the room to independently estimate a range of possible values for that Number in such a way that they believe that they have a 98 percent chance of being right, and less than 2 percent chance of being wrong. In other words, whatever they are guessing has about a 2 percent chance to fall outside their range. For example: "I am 98 percent confident that the population of Rajastan is between 15 and 23 million.“ "I am 98 percent confident that the sales of “Blink” during the months with r in them will be between 25,000 and 80,000 copies “ You would expect roughly 2 out of every 100 participants to be wrong. Results: The 2% error rate turned out to be close to the 45% in the population being tested. Who do you think were the population being tested?

10. Psychological Influences on Personal Probability Calibrating Personal Probabilities of Experts Professionals who help others make decisions (doctors, meteorologists) often use personal probabilities themselves. Using Relative Frequency to Check Personal Probabilities For a perfectly calibrated weather forecaster, of the many times they gave a 30% chance of rain, it would rain 30% of the time. Of the many times they gave a 90% chance of rain, it would rain 90% of the time, etc. Can assess whether probabilities are well-calibrated only if we have enough repetitions of the event to apply the relative-frequency definition. Calibrating Weather Forecasters and Physicians Open circles: actual relative frequencies of rain vs. forecast probabilities. Dark circles relative frequency patient actually had pneumonia vs. physician’s personal probability they had it. Weather forecasters were quite accurate, well calibrated. Physicians tend to overestimate the probability of disease, especially when the baseline risk is low. When physician quotes a probability, ask “personal or based on data?”

11. Psychological Influences on Personal Probability