Class slides - decision making and judgment

JDM week 42-27-14

Prediction

Immune Neglect Gilbert, Pinel, Wilson, Blumberg, & Wheatley, 1998

• What is affective forecasting?

• What is the durability bias?

• What is focalism?

• What is the psychological immune system? Will winning the lottery

make you happier?

Does living in CA make people happy?Schkade & Kahneman, 1998

Are Californians happier?

Why/why not?

How does this relate to the “immune neglect” paper?

Does living in CA make people happy?Schkade & Kahneman, 1998

Delusions of Success?Lovallo & Kahneman, 2003

Delusions of Success?Lovallo & Kahneman, 2003

• Why do executives tend to be over-optimistic? (Mechanisms)

• What are the consequences?

• Is this always bad?

• How does this relate to the previous articles?

• What are some ways to optimize decision-making?

Clinical vs. Actuarial JudgmentDawes, Faust, & Meehl, 1989

“SATs and other academic artifacts remain relevant in part because they

are easy—if imperfect—metrics for hiring managers to understand... Academic research has proved that

cognitive ability can predict job performance, but there is scant

evidence linking high SAT scores with employee success.”

General Discussion

• Has this week changed the way you think about prediction?

• Knowing what you do now, how would you recommend making predictions?

• What should the role of humans / human intuitions be?

• How might this have an impact in society?

Prediction Errors

Economist Irving Fisher, Oct., 1929 – 3 days before the stock market collapse

Review of Moneyball

Product-Moment Correlations of Mean Likelihood Rank with Mean Similarity Rank and Base Rate

LawComputer Science Medicine

Library Science

Business Administration

With mean similarity rank 0.93 0.96 0.92 0.88 0.88

With base rate 0.33 -0.35 0.27 -0.03 0.62

Kahneman, D., & Tversky, A. (1973) On the Psychology of Prediction. Psych Review.