The Base Rate Fallacy
Base Rate Fallacy, is a cognitive bias that affects the way we make decisions.
Now what is a cognitive bias?
Cognitive bias is a systematic error in making judgments and thinking that occurs when people are processing and interpreting information in the world around them that affects the decisions that they make. Cognitive biases are often a result of your brain’s attempt to simplify information processing
We would like to believe we are objective and rational, and generally make good decisions in our lives. Unfortunately, this is not always true, we are all prone to using heuristics and having cognitive biases which lead us to make irrational and incorrect decisions.
In this article we look at one bias The Base Rate fallacy. Lets find out what it is and how it affects us.
Base Rate Fallacy
Let’s say that residing in Manila (capital of the Philippines) has 60 librarians, 240 farmers, 44 electricians. When going to shop for groceries in this city, you meet a man named John, you notice he is quiet, shy and whenever you speak to him he seems to have a lot of information on the topics you introduce. Is john a librarian, farmer, or electrician?
If You have read the part about heuristics, we demonstrated the base rate fallacy in the representative heuristic. So maybe you were primed to not make the mistake twice. However, if you guessed Librarian you demonstrated the base rate fallacy.
Base rate fallacy (or base rate neglect) says – When people are provided with both individuating information, (specific to a person or event,) and base rate information, (objective, statistical information), people will ignore the base rate information altogether for the individuating information, rather than integrating the two.
The base rate fallacy can lead us to make inaccurate probability judgments in many different aspects of our lives. As in the aforementioned example, it can cause us to jump to conclusions about people based on our initial impressions of them. In turn, this can lead us to develop preconceived notions about people, as well as perpetuate potentially harmful stereotypes.
A classic explanation for the base rate fallacy involves the decision to take vaccinations. After the covid vaccine rollout began in the USA they noted several patients developed thrombosis after the jab. The rollout was paused to do a risk-benefit analysis, for the US population, to administer the vaccine. Among the many parameters tested were the number of expected cases of thrombosis with thrombocytopenia syndrome per 1 million vaccine doses, by sex and age group, with varying incidence and timing scenarios. They found In females between the ages of 18-49 the risk was 7 cases, per million doses, and for men between the same ages, it was 1 case, per million doses. Yet the USA saw the most number of people deciding against the vaccine. One reason was people ignoring the base rates and focusing on the stark, specific information provided by the news and other sources of people developing complications after the jab.
Situations
1. Court decisions: Eye witness testimony is in general riddled with many errors Base rate fallacy is one of them. Kahneman and Tversky demonstrated this when they presented subjects with “the cab problem”. The question was as follows- there are Two cab companies in a certain city, Green company and Blue company. There are fifteen percent blue cabs and the rest are green. One night a hit and run incident occurs and the witness identifies the cab as blue. After testing the witness’s ability to distinguish colors at night, they found he could distinguish it correctly eighty percent of the time. What is the probabiliy the witness was correct? The actual answer when calculated is forty one percent. Thus inspite of the report the hit and run was probably done by a green cab. However The court concluded there was an eighty percent chance the witness was correct and the hit and run was done by a blue cab.
2. Financial Decisions: Investors are also influenced by base rate fallacy. They often focus on weak quarterly earnings, while ignoring base rate information like- the companies product having a solid demand in the market, management having a great track records and the company’s generally consistent growth rates that can outperform the weak quarter.
3. Medical: Even medical professionals can fall for the base rate fallacy, calculating the probability of individual’s having rare diseases as more and ignoring the base probability of false positives.
How to Avoid
Now that we know about the fallacy we can avoid it by teaching ourselves to not rely on emotional reasoning and use probability judgment, focusing on objective, statistical and scientific information. For this, we need to teach ourselves probability and statistical reasoning to be able to make logical decisions when required.
Now we know about “the base rate fallacy” but we have many more biases. Cognitive biases can negatively affect how we explore and remember information, how we build our beliefs and ideas and make judgments about the world. It can also lead to distorted thinking patterns, where the bias is so automatic and deep-rooted it becomes very uncomfortable to challenge them. So read on to other biases to make more intentional and informed choices.
References
Base Rate Fallacy https://dictionary.apa.org/base-rate
Population-Level Risk-Benefit Analysis https://www.cdc.gov/vaccines/covid-19/info-by-product/janssen/risk-benefit-analysis.html
James Chen, Base Rate Fallacy https://www.investopedia.com/terms/b/base-rate-fallacy.asp
Kahneman, Daniel; Amos Tversky (1981). “Evidential impact of base rates”. In Daniel Kahneman, Paul Slovic & Amos Tversky (ed.).
“Why do we rely on specific information over statistics” https://thedecisionlab.com/biases/base-rate-fallacy/