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Base Rate Fallacy - Biases & Heuristics - The Decision Lab
Base Rate Fallacy - Biases & Heuristics - The Decision Lab
Daniel Kahneman and Amos Tversky once conducted a study where participants were presented with a
personality sketch of a fictional graduate student referred to as Tom W. They were given a list of nine areas
of graduate studies, and told to rank them in order of likelihood that that is the field in which Tom W. is
pursuing his studies. At the time when this study was conducted, far more students were enrolled in
education and the humanities than in computer science. However, 95% of participants said it was more
likely that Tom W. was studying computer science than education or humanities. Their predictions were
based purely on the personality sketch – the individuating information – with total disregard for the base
rate information.1
As much as that one person in your History elective course might look and act like the stereotypical
medical student, the odds that they are actually studying medicine are very low, since there are typically
only 100 or so people in that program, compared to the thousands of students enrolled in other faculties,
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like Management or Science. While it can be easy to make these kinds of snap judgments about people,
we can’t let specific information completely erase the base rate information.
Most of us work & live in environments that aren’t optimized for solid decision-making. We work with organizations of all kinds
to identify sources of cognitive bias & develop tailored solutions.
Representativeness Heuristic
Individual effects
The base rate fallacy can lead us to make inaccurate probability judgments in many different aspects of our
lives. As demonstrated by Kahneman and Tversky in the aforementioned example, it can cause us to jump
to conclusions about people based on our initial impressions of them.2 In turn, this can lead us to develop
preconceived notions about people, as well as to perpetuate potentially harmful stereotypes. This fallacy
can also impact our financial decisions, by prompting us to overreact to transient changes in our
investments. If the base rate statistics show consistent growth, it is likely that any setbacks are only
temporary and that things will get back on track. Yet, if we ignore the base rate information, we may feel
inclined to sell, as we may predict that the value of our stocks will continue to decline.3
Systemic effects
The individual effects of base rate fallacy can add up to become significant challenges if this fallacy is
committed by people who make probability judgments about others, such as a doctor diagnosing a
patient. In their 1982 book, Judgment Under Uncertainty: Heuristics and Biases4, Kahneman and Tversky
cited a study in which participants were given the following scenario: “If a test to detect a disease whose
prevalence is 1/1000 has a false positive rate of 5%, what is the chance that a person found to have a
positive result actually has the disease, assuming you know nothing about the person’s symptoms or
signs?” Half the participants responded 95%, the average answer was 56%, and only a handful of
participants gave the correct response: 2%. The participants in this study were not physicians themselves,
but this example demonstrates how important it is that medical professionals understand base rates, so as
not to commit this fallacy. Not taking base rate information into account can have a significant toll on the
patient’s mental wellbeing, and it may prevent physicians from examining other potential causes, as 95%
odds seem pretty certain.
Why it happens
There have been a number of explanations proposed for why the base rate fallacy occurs. One of the main
theories posits that it is a matter of relevance, such that we ignore base rate information because we
classify it as irrelevant and therefore feel that it should be ignored. It has also been suggested that the base
rate fallacy results from the representativeness heuristic.
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Relevance
Maya Bar-Hillel’s 1980 paper, “The base-rate fallacy in probability judgments”5 addresses the limitations of
previous theories of base rate fallacy and presents an alternate explanation: relevance. Specifically, we
ignore base rate information because we believe it to be irrelevant to the judgment we are making. Bar-
Hillel contends that, prior to making a judgment, we categorize the information given to us into different
levels of relevance. If something is deemed irrelevant, we discard it and do not factor it into the conclusion
we draw. Thus, it is not that we are incapable of integrating different types of information; if two types of
information are assigned equal relevance, we will give them equal consideration. It is misattributions of
relevance that cause us to ignore vital information, value certain information more than we should, or
focus on one source of information when we should be integrating multiple.
Furthermore, Bar-Hillel explains that part of what makes us view certain pieces of information as more
relevant than others is specificity. The more specific information is to the situation at hand, the more
relevant it seems. Individuating information is, by nature, incredibly specific. As such, we denote it as highly
relevant. Base rate information, on the other hand, is very general. We categorize it as low relevance
information. In making a judgment, we take into consideration the information we consider to be relevant
and ignore that which has been deemed irrelevant. To us, this may feel like an effective strategy, but it can
actually compromise the accuracy of our judgments.
Representativeness
Bar-Hillel contends that representativeness is not a sufficient explanation for why the base rate fallacy
occurs, as it cannot account for this fallacy in all contexts.6 That being said, representativeness may be one
of the factors that contributes to the base rate fallacy, specifically in cases like the Tom W. study described
by Kahneman and Tversky.7
Heuristics are mental shortcuts we use to facilitate judgment and decision-making. The representativeness
heuristic, which was introduced by Kahneman and Tversky, describes our tendency to judge the probability
of something based on the extent to which the object or event in question is similar to the prototypical
exemplar of the category it falls into. We mentally categorize objects and events, grouping them based on
similar features. Each category has a prototype, which is the average example of all the objects and events
sorted into that category. The more the object or event resembles that prototype, the more representative
of that category we judge it to be. The more representative it is, the more likely we believe its outcomes
will align with those of the prototype.8
The representativeness heuristic can give rise to the base rate fallacy, as we may view an event or object as
extremely representative and make a probability judgment based solely off of that, without stopping to
consider base rate values. To refer back to Tom W., judgments about his field of study were inferred from
his appearance and personality. He was deemed to be representative of a computer science graduate
student, thereby leading participants to rank him as more likely to be pursuing studies in that field than in
programs with far greater enrolment rates. Since there were far more students in both education and
humanities than in computer science, it was more probable that he was studying the former, rather than
the later. Yet, representativeness caused participants to overlook the base rate information, which proved
to be essential.
Why it is important
Having at least a basic knowledge of statistics is useful, as it allows you to interpret information more
accurately. It equips you to understand the results of new research, to assess whether or not a study was
well-designed, among other things. Knowledge of base rates will allow you to better understand the
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likelihood of certain events occurring in your life, whether it’s the odds of winning the lottery or developing
a certain condition.
How to avoid it
To avoid committing the base rate fallacy, we need to work on paying more attention to the base rate
information available to us, as well as recognizing that personality and past behaviors are not as reliable
predictors of future behavior as we think they are. This requires us to be more effortful when assessing the
probability that a given event will occur. It’s easier to fall back on effortless, automatic processes, which
make decision-making much easier, however, this increases the risk of error. By being aware of this fallacy
and taking an active approach to combating it, we can reduce the frequency with which we commit it.
Another early explanation of the base rate fallacy can be found in Maya Bar-Hillel’s 1980 paper, “The base-
rate fallacy in probability judgments”.10 Here, this fallacy is described as “people’s tendency to ignore base
rates in favor of, e.g., individuating information (when such is available), rather than integrate the two” (p.
211). This paper points out the limitations of Kahneman and Tversky’s representativeness explanation, and
provides an alternate theory explaining the base rate fallacy. Specifically, Bar-Hillel pinpointed perceived
relevance as the underlying factor of this fallacy. She suggested that the more specific information is, the
more relevance we assign to it. As such, we attend to individuating information because it is specific, and
therefore considered relevant, and ignore base rate information because it is general, and therefore
deemed less relevant to the topic at hand.
Many people are inclined to respond that the probability that the witness correctly identified a green cab
at night is 80%. However, everyone who gives that answer is committing the base rate fallacy. When taking
into account the base rate information, which tells us that only 15% of the cabs in the city are green, the
actual probability that the witness was correct is 41%. This probability is achieved through inferential
statistics calculations, which take into account both the percentage of each color cab in the city and the
likelihood that the witness correctly discriminated between the colors at night.
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The reason why participants took base rate information into consideration when making predictions about
their peers is that they did not have access to individuating information about any of these people. As a
result, they had to rely on base rate information. However, this was not the case when making predictions
about themselves. Participants used their own personality and past behaviors as individuating information
in making the prediction about how much money they would donate. Since we tend to value individuating
information more than base rate information, they did not adjust their predictions for themselves as they
gained access to more base rate information.13
This demonstrates that, when no specific individuating information is available, we will use base rate
information in making predictions. However, as soon as we have access to that individuating information,
we latch onto it and use it instead, thereby committing base rate fallacy.
Summary
What it is
Base rate fallacy refers to how we tend to rely more on specific information than we do statistics when
making probability judgments.
Why it happens
There are multiple factors that contribute to the occurrence of the base rate fallacy. One is the
representativeness heuristic, which states that the extent to which an event or object is representative of its
category influences our probability judgments, which little regard for base rates. Another is relevance,
which suggests that we consider specific information to be more relevant than general information, and
therefore selectively attend to individuating information over base rate information.
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A classic explanation for the base rate fallacy involves a scenario in which 85% of cabs in a city are blue and
the rest are green. One night, a cab is involved in a hit and run accident. A witness claims the cab was
green, however later tests show that they only correctly identify the color of the cab at night 80% of the
time. When asked what the probability is that the cab involved in the hit and run was green, people tend to
answer that it is 80%. However, this ignores the base rate information that only 15% of the cabs in the city
are green. When taking all the information into consideration, crunching the numbers shows that the
likelihood that the witness was correct is actually 41%.
Participants in a study were asked how much out of the five dollars they were given would they donate to a
given charity. They were asked to make the same prediction about their average peer. Next, they were
presented with the actual donations of 13 other donors and given the chance to adjust their predictions.
They adjusted their predictions of their peers to match the base rate information but did not change their
predictions for themselves. When we have access to individuating information, we assign it greater value
than base rate information, which is why their ratings of themselves stayed the same. However, participants
did not have access to individuating information about their peers and therefore relied on base rate
information instead.
How to avoid it
To avoid committing the base rate fallacy, we need to take a more active approach to assessing probability,
by working on paying more attention to the base rate information available to us and by recognizing that
personality and past behaviors are not as reliable predictors of future behavior as we think they are.
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