Much of the discussion in this book is about biases of intuition.
The agent of economic theory is rational, selfish, and his tastes do not change.
To a psychologist, it is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable.
I found in the collaboration was that Amos frequently saw the point of my vague ideas much more clearly than I did.
MSE has that property – and it is the only definition of overall error that has it. In figure 6, we have computed the value of MSE in the set of five measurements for ten possible integer values of the line’s true length.
People tend to assess the relative importance of issues by the ease with which they are retrieved from memory – and this is largely determined by the extent of coverage in the media. Frequently mentioned topics populate the mind even as others slip away from awareness. In turn, what the media choose to report corresponds to their view of what is currently on the public’s mind. It is no accident that authoritarian regimes exert substantial pressure on independent media.
The strong bias toward believing that small samples closely resemble the population from which they are drawn is also part of a larger story: we are prone to exaggerate the consistency and coherence of what we see.
Even in modern humans, System 1 takes over in emergencies and assigns total priority to self-protective actions.
Indeed, we pay people quite well to provide interesting explanations of regression effects. A business commentator who correctly announces that “the business did better this year because it had done poorly last year” is likely to have a short tenure on the air.
The hot hand is a massive and widespread cognitive illusion.
The truth is that small schools are not better on average; they are simply more variable.
The gigantic samples allow extremely fine analyses, which have confirmed the importance of situational factors, physical health, and social contact in experienced well-being. Not surprisingly, a headache will make a person miserable, and the second best predictor of the feelings of a day is whether a person did or did not have contacts with friends or relatives. It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.
Please imagine a ladder with steps numbered from zero at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?
I made myself smile and I’m actually feeling better!
These students can solve much more difficult problems when they are not tempted to accept a superficially plausible answer that comes readily to mind.
Noise is mostly a by-product of our uniqueness, of our “judgment personality.
The law of least effort is operating here. He will think as little as possible.
But noisy systems do not make multiple judgments of the same case. They make noisy judgments of different cases. If one insurance policy is overpriced and another is underpriced, pricing may on average look right, but the insurance company has made two costly errors. If two felons who both should be sentenced to five years in prison receive sentences of three years and seven years, justice has not, on average, been done. In noisy systems, errors do not cancel out. They add up.
In simple words, prospect theory cannot deal with disappointment.
Irrational is a strong word, which connotes impulsivity, emotionality, and a stubborn resistance to reasonable argument.