Classic – Judgment Under Uncertainty: Heuristics And Biases – ValueWalk Premium

Classic – Judgment Under Uncertainty: Heuristics And Biases

Judgment Under Uncertainty: Heuristics And Biases by Amos Tversky & Daniel Kahneman

Science, New Series, Vol. 185, No. 4157. (Sep. 27, 1974), pp. 1124-1131.

Judgment Under Uncertainty: Heuristics And Biases

Biases in judgments reveal some heuristics of thinking under uncertainty. — Amos Tversky and Daniel Kahneman

Many decisions are based on beliefs concerning the likelihood of uncertain events such as the outcome of an election, the guilt of a defendant, or the future value of the dollar. These beliefs are usually expressed in statements such as “I think that . . . ,” “chances are “it is unlikely that . . . ,” and so forth. Occasionally, beliefs concerning uncertain events are expressed in numerical form as odds or subjective probabilities. What determines such beliefs? How do people assess the probability of an uncertain event or the value of an uncertain quantity? This article shows that people rely on a limited number of heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental Operations. In general, these heuristics are quite useful, but sometimes they lead to severe and systematic errors.

The subjective assessment of probability resembles the subjective assessment of physical quantities such as distance or size. These judgments are all based on data of limited validity, which are processed according to heuristic rules. For example, the apparent distance of an object is determined in part by its clarity. The more sharply the object is seen, the closer it appears to be. This rule has some validity, because in any given scene the more distant objects are seen less sharply than nearer objects. However, the reliance on this rule leads to systematic errors in the estimation of distance. Specifically, distances are often overestimated when visibility is poor because the contours of objects are blurred. On the other hand, distances are often underestimated when visibility is good because the objects are seen sharply. Thus, the reliance on clarity as an indication of distance leads to common biases. Such biases are also found in the intuitive judgment of probability. This article describes three heuristics that are employed to assess probabilities and to predict values. Biases to which these heuristics lead are enumerated, and the applied and theoretical implications of these observations are discussed.

Representativeness

Many of the probabilistic questions with which people are concerned belong to one of the following types: What is the probability that object A belongs to class B? What is the probability that event A originates from process B? What is the probability that process B will generate event A? In answering such questions, people typically rely on the representativeness heuristic, in which probabilities are evaluated by the degree to which A is representative of B, that is, by the degree to which A resembles B. For example, when A is highly representative of B, the probability that A originates from B is judged to be high. on the other hand, if A is not similar to B, the probability that A originates from B is judged to be low.

For an illustration of judgment by representativeness, consider an individual who has been described by a former neighbor as follows: “Steve is very shy and withdrawn, invariably helpful, but with little interest in people, or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.” How do people assess the probability that Steve is engaged in a particular occupation from a list of possibilities (for example, farmer, salesman, airline pilot, librarian, or physician)? How do people order these occupations from most to least likely? In the representativeness heuristic, the probability that Steve is a librarian, for example, is assessed by the degree to which he is representative of, or similar to, the stereotype of a librarian. Indeed, research with problems of this type has shown that people order the occupations by probability and by similarity in exactly the same way (I). This approach to the judgment of probability leads to serious errors, because similarity, or representativeness, is not influenced by several factors that should affect judgments of probability.

Judgment Under Uncertainty -Image source: Pixabay

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