Thinking Psych

Expected Utility Theory

Humans choose actions based on the Probability of the Outcome x The Value of the outcome.

Humans deviate from this ideal in two ways…

1. Errors in estimating probabilities (odds)

2. Errors in estimating value (how much we gain or lose).

Errors in Estimating Probability (Odds)

• Sample Size Neglect

• Gamblers Fallacy

• Conjunction Fallacy

Errors in Estimating Value

• Presentism

• Prospect Theory

• Temporal Discounting

Sample Size Neglect

Small samples are more likely to deviate from population averages. People have a tendency to ignore sample size when judging probability.

Gamblers Fallacy

The belief that past events influence future independent events.

• The Hot Hand Fallacy is also in this same idea. There is no such thing as a lucky streak if we are talking about independent events with their own probability.

Conjunction Fallacy

The belief that a conjunction of A and B is more probable than one of its parts.

ex. The Linda Problem

•  Linda described as philosophy major, social justice activist. People rate "Linda is a bank teller AND active in feminist movement" as more likely than "Linda is a bank teller" – mathematically impossible.

The reason for this is because stereotype matching overrides probability logic.

Availability Bias

The action of judging probability by how easily examples come to mind instead of their actual frequency.

ex. Fear of flying bc of plane crashes vs. Fear of driving. Driving is objectively more dangerous but plane crashes are more memorable.

• Lottery Playing also goes along with this as people pay attention to salient winners (or the one in a million that won rather than the many people that played and didn’t win).

• Survivor Bias in which people may only see one of the two possible outcomes and then make the assumption that that on is more probable.

Presentism

This is when one overweighs the current states when predicting future enjoyment.

• When a hungry person believes that they will enjoy eating much more than someone who has just ate but either way hunger is the same.

Prospect Theory

The idea that people evaluate gains and losses differently based on potential losses rather than final outcomes.

• Encapsulates the idea of loss aversion (curve is steeper) which is the pain of losing is felt twice as intense as the pleasure of gaining the same amount.

  • Leads to the idea of the seller and buyer/endowment effect in which the seller might place higher value as losing is seen as more valuable.

• Diminishing sensitivity (asymptotes) however, occurs the further away you get from the reference point

• People prefer certain small gains over a risky higher expected value gain.

Temporal Discounting (Delayed Gratification)

Overvaluing immediate rewards over larger future rewards.

• Ex. Most people would take $10 now over $12 in two weeks even though if they were offered $10 in 52 weeks and $12 in 53 weeks they would choose the $12. Our present moment warps our judgment.

• Developmental Version: Marshmallow test for children show that children who have inhibitory control do better in the future.

Why is human language special?

• Discrete Combination System: Finite set of words +Grammar leads to infinite expressible ideas.

• Novel sentences can be created.

• No other communication system is this generative.

What are the three components of language?

• Semantics (Meaning)

• Phonology (Sound)

• Syntax (Rules, grammatical)

• Conventionality: Words only mean what they do because a language community agrees.

• Arbitrariness which is that there is no intrinsic link between word form and meaning (except onomatopoeia).