Arnold Kling  

Hindsight Bias

Malthus on Stilts: Clark Misin... Clark, Malthus, and the Time F...

My latest essay is on this topic.

it sets up a false set of expectations about what government can do. For example, people believe that government can regulate financial markets so that there are never any bubbles or miscalculations, no decent borrower is turned down, and no one ever defaults on a loan.

Read the entire essay. It mentions Shannon Brownlee's new book, Overtreated. In spite of her hindsight bias, and her anti-market bias, this is a very useful book. I think that anyone with an interest in health care policy will benefit from reading it.

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CATEGORIES: Political Economy

COMMENTS (3 to date)
General Specific writes:

I guess I'm a bit concerned that this essay is an attempt to excuse bad decisions, e.g. that it is saying "we're all suject to hindsight bias, therefore let's throw accountability out the window."

Accountability, feedback, and alternative points of view are extremely important aspects to the health of any system. In particular, the essay, through its political examples, seems like an attempt to ameliorate the problems with or more generally support the Bush administration--Bush and executive branch equals good, legislative branch equals bad.

Floccina writes:

Arnold have you talked to any life insurance companies about your idea for health insurance where the policy pays out on diagnosis? Julian Simon got the airlines to offer people free flights on overbookings maybe they would listen to you.

I really think a big problem that causes healthcare overtreatment is that it does not benefit the person who declines the treatment.
IMO most of us would accept more risk of undertreatment if it enabled us to get a cheaper policy. Also I could see men getting a cheapo (let's call it do not resuscitate, exclude cancer etc.) policy for themselves and a more generous policy for their wives and children.

Old people might decline a lot more care if they could get the cost in cash in lew of the care.

broadly focused writes:

Excellent essay, Arnold. Taleb's books on randomness ("Black Swan" and "Fooled by Randomness") address this issue by pointing out our tendency to try to explain 'random' events through hindsight analysis.

Hindsight analysis almost always places emphasis on the outcome of actions or decisions, not on the soundness of the decision-making process. Rational and logical decision-making can be ridiculed because of 'unlucky' events; irrational and illogical decision-making can be celebrated because of 'lucky' events.

Hindsight analysis is particularly troubling on issues of terrorism. Any effective policy at preventing terrorism can be discredited through hindsight analysis: the fact that there are no terrorism events can be used to 'prove' that the policy was unnecessary.

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