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Predicting Events

Humans are notoriously bad at accurately predicting future outcomes, especially if the prediction involves low-probability events. For example, many people would estimate the likelihood of a major terrorist attack to be significantly higher than it actually is (assuming the “actual” probability is calculated based on the most current available data).

In general, people are much better at looking at past events and discerning a pattern than they are at looking at past events and predicting future outcomes. We are built to recognize patterns and identify repeat occurrences, but we are rather bad at prediction.

Of course, that’s why statisticians and actuaries have a job in the first place!

One Comment

  1. Sulis wrote:

    People should read this.

    Friday, October 24, 2008 at 0:59 | Permalink

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