Cognitive biases are systematic errors that people make in their reasoning. A systematic error means that on average the error is towards one direction. When an error is systematic, one can take steps to try to mitigate it.

These biases arise as the result of common heuristics that human brains employ. A heuristic is a ‘rule of thumb’, a general rule that can help you quickly make decisions for complicated problems. But many of these heuristics are often not suited to making good decisions in our modern world. After all, the conditions that humans evolved during for almost all of their history were vastly different than today. If we evolved living in communities where we knew every other person by name, how can we expect to naturally be able to reason about good policy decisions for a planet with billions of people?

Cognitive biases are important to understand for two reasons. The first is so we can recognize them in ourselves, and strive to become more rational thinkers. It’s all too easy to see irrationality in others and think of yourself as immune, but you can actually practice catching yourself making common mistakes. The second, is that accounting for cognitive biases in others can help you better predict how they will actually act in games. You can design the world’s greatest school choice matching system that will provably lead to great outcomes if every family behaves perfectly rationally, but the theoretical proofs will not help you if they do not act this way.

There is a long list of cognitive biases that have been researched. I will summarize some important ones that are particularly relevant for the topics explored in this blog, and some I have full articles for as well. If you are interested in learning more:

• Thinking Fast and Slow is a popular book on the subject, although some of the psychological studies cited are dubious and must be taken with a grain of salt.
• The Wikipedia article on the topic gives an extensive list of biases.
• The website LessWrong is a fantastic (but possibly intimidating at first) community blog about cognitive biases and rational thought in general.

Note that human minds are extremely complicated and diverse, and there isn’t one clean taxonomy that categorizes all the kinds of logical mistakes people can make. Also there are many important biases related to memory and learning, for example, that I will not be covering.

Loss and Risk Aversion (Full article: here)

Loss aversion is the tendency to weigh losses more heavily than gains, which leads to decisions that too aggressively try to minimize losses (or the chance of losses.) Risk aversion is related, and is the tendency for people to try to avoid uncertain outcomes. It is usually rational to have some amount of risk aversion, but often people’s aversion to risk is miscalibrated or they are assessing risk incorrectly.

Coming soon…

Neglect of Probability

Anchoring Bias