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Inside the first urn are 50 white marbles and 50 black marbles. Inside the second urn is a mix of white and black marbles in an unknown proportion.
If you draw a black marble, you win cash. So which urn do you choose?
people strongly prefer the first urn. What makes the difference is uncertainty. With both urns, it is uncertain whether you will draw a black or white marble, but with the first urn, unlike the second, there is no uncertainty about the contents, which is enough to make it by far the preferred choice.
David Leonhardt warns of pundits’ tendency to overreact to gaffes of candidates—
Leonhardt rightly reminds forecasters that political fundamentals, like the economy and demographics, largely determine elections
The Federal Reserve has many reasons to hide behind vague verbiage. They don’t want to be blasted for being on the “wrong side of maybe,”
they don’t want the public to see how often they change their minds because the public often sees belief updating as a sign one is confused, not rational.
Efforts to identify “supers”—superhospitals or superteachers or super–intelligence analysts—are easy to dismiss for two reasons: (1) excellence is multidimensional and we can only imperfectly capture some dimensions
(2) as soon as we anoint an official performance metric, we create incentives to game the new system by rejecting very sick patients or ejecting troublesome students.
Tournaments have the effect that Samuel Johnson ascribed to the gallows: they concentrate the mind (in the case of tournaments, on avoiding reputational death).
