Here’s one more good essay on Cognitive biases potentially affecting judgment of global risks. More black swans, basically.

Heuristics gives us good estimates of probability, especially for simple actions. It is pure inductive logic, so it is not exact and we can make many errors. Cognitive bias makes us believe these errors and fallacies.

These errors cause us to underestimate some risks and overestimate others. Misleading Vividness makes us think that homocides and accidents kill as many people as disease, even though disease is far deadlier.

This essay compiles a lot of data on hindsight bias, confirmation bias, conjunction fallacy, affect bias, bystander apathy, diffusion of responsibility and many more.

Just two examples to show how we misperceive risks and willingness to pay for risks

Hindsight Bias distorts our legal systems. Here’s an example of legally holding people accountable for unexpected events:

Hindsight bias is important in legal cases, where a judge or jury must determine whether a defendant was legally negligent in failing to foresee a hazard (Sanchiro 2003). In an experiment based on an actual legal case, Kamin and Rachlinski (1995) asked two groups to estimate the probability of flood damage caused by blockage of a city-owned drawbridge. The control group was told only the background information known to the city when it decided not to hire a bridge watcher. The experimental group was given this information, plus the fact that a flood had actually occurred. Instructions stated the city was negligent if the foreseeable probability of flooding was greater than 10%. 76% of the control group concluded the flood was so unlikely that no precautions were necessary; 57% of the experimental group concluded the flood was so likely that failure to take precautions was legally negligent. A third experimental group was told the outcome and also explicitly instructed to avoid hindsight bias, which made no difference: 56% concluded the city was legally negligent. Judges cannot simply instruct juries to avoid hindsight bias; that debiasing manipulation has no significant effect.

Hindsight bias is actually malicious in a way. Not only do we suggest that surprising events were predictable, but we accuse those who were surprised of being criminally negligent and ruin their lives.

Then what? We continue to underestimate the probability of future events.

Viewing history through the lens of hindsight, we vastly underestimate the cost of preventing catastrophe.

How about another bias – Scope Neglect.

Three groups of subjects considered three versions of the above question, asking them how high a tax increase they would accept to save 2,000, 20,000, or 200,000 birds. The response – known as Stated Willingness-To-Pay, or SWTP – had a mean of $80 for the 2,000-bird group, $78 for 20,000 birds, and $88 for 200,000 birds. (Desvousges et. al. 1993.) This phenomenon is known as scope insensitivity or scope neglect.

Purchase of moral satisfaction suggests that people spend enough money to create a ‘warm glow’ in themselves, and the amount required is a property of the person’s psychology, having nothing to do with birds. Good cause dump suggests that people have some amount of money they are willing to pay for “the environment”, and any question about environmental goods elicits this amount.

Admit it, we all tell pollsters we care very deeply about the environment. But when it comes down to it, we’re willing to give $80 no matter how big or small the problem is.

Not just the environment, we do it for people too.

Whatever that is, it is not rational.

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