Monday, July 6, 2015

Loss aversion bias combined with stereotyping

Scott Alexander, in The Case of the Famous Physicist, has a great description for the type of situation which drives people to create heuristics, stereotypes and other shortcuts when decision-making under uncertainty. He is actually describing the challenge of a psychiatrist but the situation is analogous.
I’m also stuck in a system where the primary incentive is that if I ever fail to commit someone, then if they do anything bad after that I can be sued for everything I own. So I am stuck drawing partial conclusions, from incomplete evidence, in time I don’t have, from people I can’t necessarily trust, without even the ability to err on the side of caution.
I will bear the consequences of my decision.

I don't have enough information.

I have to make the decision more quickly than I can gather the necessary information.

I am uncertain about the information I do have.
Yep. There's where stereotypes and heuristics come from. Not ideal but often optimal given the constraints.

People tend to be loss averse. Loss aversion bias combined with stereotyping (arising from decision-making under constraints) leads to a transfer of risk (or more properly, lost opportunity) to anybody in the decision-maker's Out-Group and to the benefit of the less reputable within the In-Group. The solution is of course perfect particular information about everyone and everything.

In the absence of that unachievable ideal, what are the actions which can change the decision-making dynamics so that more optimal decisions can be made, benefitting the decision-maker and the reliable members of the Out-Group?

No comments:

Post a Comment