Living in an Uncertain World

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Science  23 Jul 2004:
Vol. 305, Issue 5683, pp. 452
DOI: 10.1126/science.305.5683.452d

Very few things in life are certain, apart from death and taxes, and coping with probabilistic events is essential if we are to make any decisions at all. Most of us do, in fact, make decisions daily, but our assessments of event probabilities may not be as accurate or as coldly rational as we would like to believe.

In particular, Hertwig et al. compare the choices of people who received written descriptions (the amount of money to be gained or lost and the probability of winning or losing it) of two options with those made by people who were not given the descriptions and instead were allowed to sample the possible outcomes freely and iteratively, thus forming an empirical estimate of the expected values of the options. The authors find that the first group tends to overweight the likelihood of rare events, so that a large but infrequent payoff, for example, is selected more often than rational decision theory would predict. Conversely, the second group tends to discount rare events because they're unlikely to come across them during the sampling period (which may be constrained by our working memory cache), and they pay more attention to recently experienced outcomes, which are, of course, unlikely to include instances of rare events. — GJC

Psychol. Sci., in press.

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