Although fans think a basketball player can have “hot hands,” psychologists disagree. We might just be displaying our tendency to select facts that support what we already believe–our confirmation bias.
Citing the “hot-hand phenomenon,” many basketball fans believe that players have a greater chance of shooting successfully following several previous points. Then, because they expect a hot hand, they are more likely to identify it. And yet, it just isn’t so. Studying more than a season of Philadelphia 76er games, researchers concluded that there was “no evidence for a positive correlation between the outcomes of successive shots.” Instead, the data echoed random sets of numbers.
Confirmation bias might also affect how we respond to the Rogoff-Reinhart controversy.
Very simply stated, the research of Harvard economists Kenneth Rogoff and Carmen Reinhart tells us that a 90% debt to GDP ratio is a tipping point. With more debt, GDP growth evaporates. Because their work indicates that austerity rather than stimulus can provide the path to economic health, the Rogoff-Reinhart studies have given academic validity to spending cutbacks.
Now, new research from the University of Massachusetts says the Rogoff-Reinhart work has quantitative inaccuracies. Finding a mistaken number and (what they say is) questionable data weighting and country selection, these economists challenge the underpinnings of the Rogoff-Reinhart conclusions.
Reading the exchange, I suspect we will see confirmation bias. Costly for any researcher to negate previous conclusions, I wonder whether each side will choose data to confirm a previously held point of view.
Sources and Resources: If you doubt the accuracy of a challenge to the “hot-hand” phenomenon, do read the original Tversky et al paper here. Then, this Wired article connects it to confirmation bias. (Please note that Wired questions the sources used by its author but I checked and all appear accurate.) As for the challenge to Rogoff and Reinhart, these two BusinessInsider articles, here and here, provide an ideal overview and the R/R response.
Having just begun The Sense of an Ending by Julian Barnes, I wanted to share a wonderful excerpt. While this student is commenting on the origins of the First World War, his comments take us far beyond.
“Indeed, isn’t the whole business of ascribing responsibility a kind of cop-out? We want to blame an individual so that everyone else is exculpated. Or we blame a historical process as a way of exonerating individuals. Or it’s all anarchic chaos, with the same consequence. It seems to me that there is–was–a chain of individual responsibilities, all of which were necessary, but not so long a chain that everybody can simply blame everyone else. But of course, my desire to ascribe responsibility might be more a reflection of my own cast of mind than a fair analysis of what happened. That’s one of the central problems of history, isn’t it, sir? The question of subjective versus objective interpretation, the fact that we need to know the history of the historian in order to understand the version that is being put in front of us.”
Can’t we substitute economist for historian in the excerpt? And might this student’s comments about “ascribing responsibility” refer also to our recent financial crisis?
Sources and Resources: The excerpt is from p. 13 in the paperback edition of The Sense of an Ending, winner of the 2011 Man Booker Prize. You might also enjoy this econtalk podcast on “Truth, Science and Academic Incentives” and this one on “Science, Replication and Journalism.” Both podcasts take you to academic bias and relate to Daniel Kahneman’s discussion of confirmation bias in Thinking Fast and Slow, p. 80-81.
Posted by: adminEcon
Tags: belief, causation, confirmation bias, Daniel Kahneman, economists, financial crisis, First World War, great recession, historians, Julian Barnes, The Sense of an Ending
It would be so nice if we could say, “Yes, the 2009 stimulus was a good idea,” or “No, it was not.” Instead, the debate continues.
Discussing his new book, journalist Michael Grabell tells us that we are unnecessarily dividing ourselves between government believers and disbelievers when the focus should be on designing programs that work. Grabell says the problem was not the $787 billion. Stimulus planners chose the wrong “shovel ready” projects. States were unprepared for a tsunami of money. As a whole, the initiative had inadequate “oomph” to create a sustainable recovery.
Where did it work? He says to look at Cash for Clunkers, the program that paid us to trade in our old, emission spewing jalopies for new models. Grabell says the program successfully stimulated car production and supported car dealers.
Not everyone agrees.
An op-ed in the Boston Globe described why stimulus dollars made used car prices soar. On the supply side, car dealers had to destroy the old gas guzzling vehicles they received. On the demand side, with joblessness soaring, more people needed cheaper, “pre-owned” transportation. Less supply? More demand? Equilibrium price rises.
As you can see, the facts abound to applaud or condemn the impact of the 2009 Stimulus Act . Sometimes I even wonder which comes first, the facts or the conclusion. Exhibiting “confirmation bias,” first we walk in with our bias, and then we find a slew of facts to support what we believe in.
The Economic Lesson
In his General Theory on Employment, Interest, and Money, British economist John Maynard Keynes said that nations should borrow during a recession. Then, by using the money to “prime the pump”, fiscal activism stimulates business expansion, the recession ends, government revenue surges, and the debt is repaid.
An Economic Question: How might “confirmation bias” affect your economic analysis about the impact of government spending?