The quiz Daniel Kahneman wants you to fail • Hacker News Board

Re: The quiz Daniel Kahneman wants you to fail

#71

Post by nl » Fri, Jan 06, 2012, 10:17 AM UTC

fhars wrote: post #52

2arrs2ells wrote: post #27

Earlier quoted context omitted.

The interesting thing is not that people are risk averse (and thus choose 100% chance of $900), the interesting thing is that people become risk seeking when it comes to losses (and thus choose 90% chance of -$1000). You're creating a bit of a straw man when it comes to behavioral economists and their view of "rational actors" - the whole field is built around the understanding that there is more to economic decision…

It could also be that the utility of money is perceived to be logarithic, and then it depends on the base the individual uses in the personal utitlity function (which probably depends on the persons net worth) which choice is rational. For example, ln 900 > 0.9 * ln 1000.

This may well be true.

But the point is that research has show that almost all people have this bias that makes them much more risk adverse when avoiding losses than when they don't already have the money.

We can speculate a lot on the reasons, but that speculation isn't tested yet.

Re: The quiz Daniel Kahneman wants you to fail

#72

Post by Jach » Fri, Jan 06, 2012, 10:22 AM UTC

bfung wrote: post #69

Uhhrrr wrote: post #6

The engineer/lawyer problem explanation (spoilers) is only correct in a world where lawyers and engineers have all the same characteristics. That the sampled individual is a man will skew things all by itself. Of the lawyers, approximately 40% will be women, whereas only 11% of the engineers. So our samplee could be one of 27 engineers or 42 lawyers - we've already bumped Peng from .3 to .39! That he likes math puzzl…

30 engineers, 70 lawyers, the probability of being an engineer is 30%. What Jack likes to do is irrelevant. Why can't a lawyer like math and dislike politics (winning a case framed by certain rules is just a puzzle/game to hack)?

What Uhrrr is saying is that prob(Person is an engineer | Named Jack and has Jack's description and initial 30/70 ratio) > prob(Person is an engineer | 30/70 ratio)=30%. I think the article goofed on that question too. I'd rather have seen an illustration of the conjunction bias, which is similar. Given Jack's description, what's more probable: Jack is a lawyer, or Jack is a lawyer who likes classical music. (The first one, but people overwhelmingly pick the second one.)

Re: The quiz Daniel Kahneman wants you to fail

#73

Post by screwt » Fri, Jan 06, 2012, 10:27 AM UTC

jfoutz wrote: post #50

diego wrote: post #45

Earlier quoted context omitted.

Yes, there's more to it. The experiment was done with 70/30 and 30/70 ratios for different subjects. The book doesn't say whether they specified they were all males, my guess would be that they did.

a frequentist would take issue with the two sons, one born on a tuesday problem. you can actually count up the permutations. let's say we have 10 engineers, 9 of them are male. we also have 10 lawyers, 6 of them are male. Let's say one in 10 people likes doing math on the weekend. There are 90 out of 100 ways to have a group of male engineers, one of which who likes math, but only 60 out of 100 ways to do the same wi…

> This isn't bayesian, this is just counting boxes on a permutation table.

It's the same thing. Bayes' theorem allows you to shortcut straight to the answer without having to draw out a full probability tree / permutation table. But the underlying math is the same - in each case you have a different probability of B given A, versus B given (not A).

Re: The quiz Daniel Kahneman wants you to fail

#74

Post by nl » Fri, Jan 06, 2012, 10:29 AM UTC

Radim wrote: post #70

nl wrote: post #67

Earlier quoted context omitted.

The questions aren't science - that statistics that predict that most people will get them wrong are. Or rather - the theories which predict how people will (statistically) make sub-optimal decisions in certain circumstances are science: they make predictions that can be tested.

I believe paganel is referring exactly to the "sub-optimal decision" part, in the explanation (not the questions themselves). And yes, this quiz seems a load of underspecified cargo-cult horsecrap. I surely hope the original research was of higher quality.

I believe paganel is referring exactly to the "sub-optimal decision" part, in the explanation (not the questions themselves).

Can you expand on that? The point of the article is that people will (statistically) get the questions wrong, or at least have biases in their responses.

For example, in the first question the grandparent poster may well have had good reasons to answer as they did, but that doesn't discount the fact that most people are vulnerable to the attribute substitution bias[1].

And yes, this quiz seems a load of underspecified cargo-cult horsecrap.

That's to be expected isn't it? They are trying to show five different statistical effects in five questions. To do it properly they would have to ask 10's of questions for each one, but I don't think that would work for a Vanity Fair sidebar article. Instead, they tried to find questions that would demonstrate the principles to most people.

[1] http://en.wikipedia.org/wiki/Attribute_substitution

Re: The quiz Daniel Kahneman wants you to fail

#75

Post by erichocean » Fri, Jan 06, 2012, 10:41 AM UTC

neonkiwi wrote: post #44

X-Istence wrote: post #41

Earlier quoted context omitted.

Yes, however there is a slight chance of winning the odds and not paying anything. The risk is minimal. If the numbers were further apart I don't think the same logic would kick in. A = $900 lost B = $9000 lost with a 90% chance Those are odds I wouldn't want to try. I would take the instant loss knowing that my odds are just not good enough to win if I were to choose B.

The reason that $1000 at 90% odds and $900 at 100% odds are used in this example is the expected value is the same in both cases, making the situations 'equivalent'. A 90% chance of losing $9000 has an expected value of -$8100.

The way I read it is this:

Do you want to be guaranteed you'll lose $900?

Or do you want a 10% chance you'll lose nothing at all, with a 90% chance you'll lose another $100?

So given a choice between being (nearly) totally wiped out, or having the chance of not being wiped out, people take the chance of keeping their cash.

Makes sense to me.

Re: The quiz Daniel Kahneman wants you to fail

#76

Post by gizzlon » Fri, Jan 06, 2012, 10:47 AM UTC

The ticket questions is dumb. Has anyone heard a better version of it?

At least to me, the important factors are: Do I remember where I'm suppose to sit? Would It be immoral to attend even if I lost the physical stub?

Re: The quiz Daniel Kahneman wants you to fail

#77

Post by ssp » Fri, Jan 06, 2012, 10:49 AM UTC

chimeracoder wrote: post #53

colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

> I never understand why economists think that a rational actor would consider them equivalent They don't: https://en.wikipedia.org/wiki/Expected_utility In short, there are three types of people: risk-averse, risk-neutral, and risk-preferring. (In the general case, people can exhibit all three types of behavior at different income levels, but let's keep things simple). Imagine a graph, with income on the x-axis and…

Distinguishing between risk-averse/neutral/preferring seems like begging the question to me. Couldn't there be an objective answer to which of three behaviors is the most rational in some situation?

Re: The quiz Daniel Kahneman wants you to fail

#78

Post by radu_floricica » Fri, Jan 06, 2012, 11:15 AM UTC

colanderman wrote: post #23

The questions involving "90% chance of $1000 or 100% chance of $900" always bother me. I never understand why economists think that a rational actor would consider them equivalent; they're not , unless you are making that choice many many times. But if I'm given that chance once (which is presumably what most participants assume, since that's not a choice that comes up often in one's life), it's really then a choice…

The book also discusses that. When the problem is _not_ about a life-changing amount, it is better to take the riskier choice when the expected utility is the same. The explanation is long-ish (and honestly, almost above my head - took me awhile to grok it) and involves the sum of all such incidents over a lifetime, and differences in accumulating utility vs accumulating wealth.

Maybe someone who read the book more recently could take a stab at describing it.

Re: The quiz Daniel Kahneman wants you to fail

#79

Post by Scaevolus » Fri, Jan 06, 2012, 11:18 AM UTC

ssp wrote: post #77

chimeracoder wrote: post #53

Earlier quoted context omitted.

> I never understand why economists think that a rational actor would consider them equivalent They don't: https://en.wikipedia.org/wiki/Expected_utility In short, there are three types of people: risk-averse, risk-neutral, and risk-preferring. (In the general case, people can exhibit all three types of behavior at different income levels, but let's keep things simple). Imagine a graph, with income on the x-axis and…

Distinguishing between risk-averse/neutral/preferring seems like begging the question to me. Couldn't there be an objective answer to which of three behaviors is the most rational in some situation?

Rational towards what end? Maximizing expected gain and minimizing variance are both reasonable metrics.

Re: The quiz Daniel Kahneman wants you to fail

#80

Post by mseebach » Fri, Jan 06, 2012, 11:30 AM UTC

erichocean wrote: post #75

neonkiwi wrote: post #44

Earlier quoted context omitted.

The reason that $1000 at 90% odds and $900 at 100% odds are used in this example is the expected value is the same in both cases, making the situations 'equivalent'. A 90% chance of losing $9000 has an expected value of -$8100.

The way I read it is this: Do you want to be guaranteed you'll lose $900? Or do you want a 10% chance you'll lose nothing at all, with a 90% chance you'll lose another $100? So given a choice between being (nearly) totally wiped out, or having the chance of not being wiped out, people take the chance of keeping their cash. Makes sense to me.

It seems odd to me that this disproves Bernoulli theory "that a person’s willingness to gamble a certain amount of money was a product of how that amount related to his overall wealth".

If I could pull $900-$1000 from my savings with no immediate consequences, I'd be more likely to spend the $900 at 100%. But if loosing $900-$1000 means I'll have to tell my landlord I'll be late with the rent and then finding someone to borrow it from, and paying it back with interest, the extra $100 aren't significantly more crippling - it's the transaction cost of going through all this bother that's problematic - I'll take a 10% chance.

Come to think of it, I actually did something like this: Prior to moving abroad a while ago, I consulted a lawyer to make sure I did everything right to avoid double taxation. That was a taking on a 100% chance of a rather big expense to avoid an unknown chance of an even larger expense.