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9
Biases in probability
assessment
Introduction
Most of the methods that are designed to help people to make decisions
under conditions of uncertainty require estimates of probabilities for
the possible outcomes of the decision. Because of the unavailability of
suitable statistical data, these probabilities will usually be subjective
estimates based on human judgment. This raises the question, how
good are people at estimating probabilities? Over the past 30 years or
so, this question has been the subject of a great deal of research by
psychologists and in this chapter we will look at the results of their
work. It is important to note that much of this work has been based
on experiments which were carried out in psychological laboratories.
While this has allowed human judgment to be carefully studied under
controlled conditions, it has also been criticized for failing to reflect
the quality of judgments made by real-world decision makers. We
will consider this issue at the end of the chapter and also review
the arguments that human judgment may not be as poor as many
psychological studies suggest.
Before proceeding, you might find it interesting to assess your own
ability to estimate probabilities by answering the following questionnaire.
We will give you the answers in the course of the subsequent
discussion.
Test your judgment
(1) In 1991, approximately what proportion of people in the USA were
victims of robbery, according to the official statistics?
(2) In Britain are you more at risk of fatal injury if you (a) spend
an hour riding fairground machines or (b) drive a car for an
hour?