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Thursday, January 22, 2015

'Not Seeing Luck'

Chris Dillow at Stumbling and Mumbling:

Not seeing luck: I claimed the other day that those of us who are in the global 1% are apt to under-estimate our good fortune. There is, in fact, quite robust evidence from other contexts that we tend to under-rate luck and over-rate skill and causality. ...

This is probably because of a self-serving bias... However, other research shows that people also see skill where none in fact exists even in other people. ... This sort of behaviour has been confirmed in laboratory experiments. ...

I suspect that this is part of an older-attested phenomenon - that people under-rate randomness and over-rate causality, which is one reason why we draw overconfident inferences from noisy data. ...

You might see this as an echo of David Hume's claim, that our ideas about causality result merely from custom and habit and so are fallible.

It also, I suspect, helps explain a claim made by Hume's good friend. If we over-rate causality and under-rate luck, we will exaggerate the extent to which the wealthy deserve their fortune. As a result:

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent...The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness. (Theory of Moral Sentiments, I.III.29)

    Posted by on Thursday, January 22, 2015 at 10:29 AM in Economics | Permalink  Comments (29)


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