Overconfidence Explained

We seem close to a good account of overconfidence:

We study a large sample of 656 undergraduate students, tracking the evolution of their beliefs about their own relative performance on an IQ test as they receive noisy feedback. … Subjects (1) place approximately full weight on their priors, but (2) are asymmetric, over-weighting positive feedback relative to negative, and (3) conservative, updating too little in response to both positive and negative signals. These biases are substantially less pronounced in a placebo experiment where ego is not at stake. We also find that (4) a substantial portion of subjects are averse to receiving information about their ability, and that (5) less confident subjects are more likely to be averse. We unify these phenomena by showing that they all arise naturally in a simple model of optimally biased Bayesian information processing … [of] agents who derive utility directly from their beliefs (for example, ego or anticipatory utility). (more; HT Dan Houser)

They also have results on how overconfidence relates to IQ and gender:

We show that agents who are of high ability according to our IQ quiz, and hence arguably cognitively more able, are just as conservative and asymmetric as those who score in the bottom half of the IQ quiz. … In our data women differ significantly in their priors, are significantly more conservative updaters than men while not significantly more asymmetric, and significantly more likely to be averse to feedback. These gender differences are consistent with our theoretical framework if a larger proportion of women than men value belief utility.

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  • Mark M

    This is really a study of confirmation bias, right? At least in the context of IQ tests. It’s interesting that high IQ individuals seem to have just as much confirmation bias as low IQ individuals.

    This makes sense to me in terms of evolution. We can’t keep evaluating everything over and over. We wouldn’t have the time. So once we make a decision or hold a belief, we tend to stick to it. This study supports the idea that confirmation bias is hard-wired into our systems. (It doesn’t prove it, but provides support for that argument).

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  • Jayson Virissimo

    I’m surprised Hanson didn’t comment on the link between sex, belief utility, and religiosity (perhaps a future post?).

  • Konkvistador

    Maybe he just wants to avoid the useless drama that always follows any such observation?

    • Has he avoided drama in the past?

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