An Overestimate of Knowledge

The overconfidence effect occurs when we become more confident in our behavior, attributes, and physical characteristics than is justified.

fig. 1

Estimating Time

We tend to be overconfident about how soon we can get things done.

KEY POINTS

There are some benefits to overconfidence, even though it can often lead to miscalculations when forming judgments.
Additionally, we can learn to make changes to our overconfidence and become more accurate with time and feedback (Fischhoff, 1982).
Many people who are overconfident are seen as happier and find it easier to make difficult decisions than those who aren't (Baumeister, 1989; Taylor, 1989).

TERMS

planning fallacy
This describes the tendency for people to overestimate their rate of work or to underestimate how long it will take them to get things done.
overconfidence
An excessive degree of confidence, and an effect in cognitive psychology which shows that people are systematically biased toward their own abilities.
Core self-evaluations
These represent stable personality traits which encompass an individual's subconscious, fundamental evaluations about themselves, their own abilities, and their own control.

EXAMPLES

An example of the planning fallacy is when a student misjudges the time he needs to complete a large project (Figure 1). Due to her overconfidence, the student overestimates her ability to finish quickly, and therefore underestimates the time it actually takes to complete the assignment, resulting in an all-night work session in order to complete the project on time.

The Overconfidence Effect

The overconfidence effect is a well-established bias in which the subjective confidence of people in their judgments is reliably greater than their objective accuracy, especially when confidence is relatively high. Overconfidence is one example of a miscalibration of subjective probabilities. According to Metcalfe (1998), the overconfidence effect is most likely to occur after a series of "successes" and can lead to excessive risk-taking.

Disadvantages of Overconfidence

A reliance on intuition is most readily linked to one’s own experiential knowledge, and is differentiated from one’s probability judgment. Thus, if people have more experience with a particular task or domain, they are more likely to rely on their intuition and be overconfident in their abilities than a person who is less experienced. As such, research has found that people are more likely to be overconfident as they increase in age (Hansson et al, 2008).

The most common way in which overconfidence has been studied is by asking people how confident they are in specific beliefs they hold or answers they provide. The data show that confidence systematically exceeds accuracy, implying that people are more sure that they are correct than they deserve to be. Put another way, the error rate was 20% when subjects expected it to be 0%. In a series where subjects made true-or-false responses to general knowledge statements, they were overconfident at all levels. When they were 100% certain of their answer to a question, they were wrong 20% of the time.

Overconfidence has been called the most “pervasive and potentially catastrophic” of all the cognitive biases to which human beings fall victim. Daniel Kahneman said, "Overconfident professionals sincerely believe they have expertise, act as experts and look like experts. You will have to struggle to remind yourself that they may be in the grip of an illusion."

Oskamp (1965) tested groups of clinical psychologists and psychology students on a multiple-choice task in which they drew conclusions from a case study. Along with their answers, subjects gave a confidence rating in the form of a percentage likelihood of being correct. This allowed confidence to be compared against accuracy. As the subjects were given more information about the case study, their confidence increased from 33% to 53%. However their accuracy did not significantly improve, remaining under 30%. This experiment thus demonstrated that overconfidence increased as the subjects had more information to base their judgment on.

Advantages of Overconfidence

There are some benefits to overconfidence, even though it can often lead to miscalculations when forming judgments. Many people who are overconfident are seen as happier and find it easier to make difficult decisions (Baumeister, 1989; Taylor, 1989). This is because overconfident individuals may not grasp the difficulty or depth of severity of the decision or task they are about to embark on, and in turn are not likely to exhibit the signs of stress and discomfort that a more accurate appraisal of their ability may garner.

Perhaps the most celebrated better-than-average finding is Svenson’s (1981) finding that 93% of American drivers rate themselves as better than the median. The frequency with which school systems claim their students outperform national averages has been dubbed the “Lake Wobegon” effect, after Garrison Keillor’s apocryphal town in which “all the children are above average.” Overplacement has likewise been documented in a wide variety of other circumstances. Kruger (1999), however showed that this effect is limited to “easy” tasks in which success is common or in which people feel competent. For difficult tasks, the effect reverses itself and people believe they are worse than others.

Some researchers have claimed that people think good things are more likely to happen to them than to others, whereas bad events were less likely to happen to them than to others. But others (Chambers & Windschitl, 2004; Chambers, Windschitl, & Suls, 2003; Kruger & Burrus, 2004) have pointed out that people tended to examine good outcomes that happened to be common (such as owning one’s own home) and bad outcomes that happened to be rare (such as being struck by lightning). Event frequency accounts for a proportion of prior findings of comparative optimism. People think common events (such as living past 70) are more likely to happen to them than to others, and rare events (such as living past 100) are less likely to happen to them than to others.

Very high levels of core self-evaluations (CSE), a stable personality trait composed of locus of control, neuroticism, self-efficacy, and self-esteem, may lead to the overconfidence effect. People who have high core self-evaluations will think positively of themselves and be confident in their own abilities, although extremely high levels of CSE may cause an individual to be more confident than is warranted.

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http://psychology.wikia.com/wiki/List_of_cognitive_biases
http://www.ncbi.nlm.nih.gov/pubmed/15647138
http://www.ncbi.nlm.nih.gov/pubmed?term=Zauberman%20%26%20Lynch%2C%202005
http://www.atypon-link.com/GPI/doi/abs/10.1521/jscp.1989.8.2.176
http://www.ncbi.nlm.nih.gov/pubmed/18808243
http://en.wikipedia.org/wiki/Overconfidence_effect