Overconfidence in politics

One of the best-attested cognitive biases - which has effects in boardrooms (pdf) and stock markets - is overconfidence. A new paper (pdf) by Pietro Ortoleva and Erik Snowberg shows that it also has political effects.

They estimated the overconfidence of almost 3000 American voters by asking them what the latest unemployment and inflation rates were, and getting them to say how confident they were of these numbers. They then found that overconfidence on this measure was strongly correlated with ideological extremism, especially on the right. What's more, such overconfidence and extremism were both correlated with the propensity to vote.

In this sense, the shrill partisanship of American politics is rooted in a cognitive bias.

But here's the puzzle. There should in theory be a negative correlation between confidence and extremism; note the tagline of my blog. People should think: "most people don't hold my views; it's possible therefore that they know something I don't". But this view is the minority one. Why?

One reason lies in the asymmetric Bayesianism proposed by Glaeser and Sunstein; we are more sceptical about information that disconfirms our priors than that which corroborates them.

Another reason, say Ortleva and Snowberg, is that "it is very di�cult to persuade overcon�dent citizens that their prior is incorrect as they will tend to attribute contradictory information to others' biases." (I might be guilty of this!).

I'd add that these mechanisms are supported by two others.

One is that politicians are themselves overconfident; you wouldn't enter a career as precarious as politics if you weren't. Leaders thus tend to buttress their followers' confidence (at least in public).

Secondly, in politics, the cost of being wrong might be large for society, but it is small for the individual. Those equity investor who thinks a £5 share is worth £10 will, sometimes, learn the hard way not to be so overconfident.But political partisans don't bear a personal cost for being wrong.

At risk of being epically self-unaware, this corroborates one of my priors - that overconfidence, far from being selected against, can actually be magnified by politics.