The Legal Analyst: A Toolkit for Thinking about the Law

By Ward Farnsworth | Go to book overview

23 Hindsight Bias

Once something happens, people tend to think it was more likely to occur, and easier to foresee, than it really was. This is known as hindsight bias. A famous demonstration of it was provided by a study in which researchers told their subjects about a nineteenth-century battle between the British and the Gurkhas of Nepal.23 The circumstances of the battle were described, and the subjects then were asked to estimate the probabilities of various outcomes—victory for the British, victory for the Gurkhas, or some sort of stalemate. Then other groups were given the same information, but they were also told which one of those outcomes did occur. They again were asked to estimate the likelihood in advance of each possible result. The subjects who were told the result of the battle tended to rate the actual result as much more likely than those who weren’t told anything about it; thus people who were told that the British won the battle tended to say that the British were likely to win all along. The probability that something would happen should be the same regardless of whether it happened in fact, but humans have trouble keeping the issues separate. The problem isn’t confined to judgments about obscure historical events. The bias has been documented extensively in decisions of all sorts. The precise reasons are a matter of dispute, but may involve “creeping determinism”: once the outcome is known, the mind begins to focus on all the reasons that contributed to it and to deemphasize the factors that would have seemed salient if the result had been otherwise; the mind searches for a satisfying story to account for the ending. Once it is found, it makes the ending seem inevitable.24

Hindsight bias has many applications to decisions in the real world. Here is an example from medical practice: researchers gave doctors information about some patients along with five ways the patients might be diagnosed. The doctors all were told to rank the five possible diagnoses in order of their likely accuracy; but half of the doctors also were told which diagnosis had turned out to be correct. They still were instructed to say what the right rankings would have been ex ante—in other words, before knowing which diagnosis turned out to be correct. Their judgments were strongly infected by hindsight bias. Half of the doctors who

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The Legal Analyst: A Toolkit for Thinking about the Law
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • Acknowledgments xi
  • Part I - Incentives 1
  • 1 - Ex Ante and Ex Post 3
  • 2 - The Idea of Efficiency 13
  • 3 - Thinking at the Margin 24
  • 4 - The Single Owner 37
  • 5 - The Least Cost Avoider 47
  • 6 - Administrative Cost 57
  • 7 - Rents 66
  • 8 - The Coase Theorem 75
  • Part II - Trust, Cooperation, and Other Problems for Multiple Players 85
  • 9 - Agency with Eric Posner 87
  • 10 - The Prisoner's Dilemma 100
  • 11 - Public Goods 109
  • 12 - The Stag Hunt 117
  • 13 - Chicken 126
  • 14 - Cascades 136
  • 15 - Voting Paradoxes 144
  • 16 - Suppressed Markets with Saul Levmore 152
  • Part III - Jurisprudence 161
  • 17 - Rules and Standards 163
  • 18 - Slippery Slopes with Eugene Volokh 172
  • 19 - Acoustic Separation 182
  • 20 - Property Rules and Liability Rules 188
  • 21 - Baselines 198
  • Part IV - Psychology 207
  • 22 - Willingness to Pay and Willingness to Accept- The Endowment Effect and Kindred Ideas 209
  • 23 - Hindsight Bias 218
  • 24 - Framing Effects 224
  • 25 - Anchoring 230
  • 26 - Self-Serving Bias, with a Note on Attribution Error 237
  • Part V - Problems of Proof 247
  • 27 - Acoustic Separation 249
  • 28 - Standards of Proof 257
  • 29 - The Product Rule 273
  • 30 - The Base Rate 281
  • 31 - Value and Markets 294
  • Notes 305
  • Author Index 329
  • Subject Index 335
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