Noise: A Flaw in Human Judgment

by Daniel Kahneman

System noise can be broken down into level noise and pattern noise.

Level noise is the variability of the average judgments made by different individuals.

The ambiguity of judgment scales is one of the sources of level noise.

The main source of pattern noise is stable: it is the difference in the personal, idiosyncratic responses of judges to the same case. Some of these differences reflect principles or values that the individuals follow, whether consciously or not.

Pattern noise also has a transient component, called occasion noise.

There is a limit to the accuracy of our predictions, and this limit is often quite low. Nevertheless, we are generally comfortable with our judgments. What gives us this satisfying confidence is an internal signal, a self-generated reward for fitting the facts and the judgment into a coherent story. Our subjective confidence in our judgments is not necessarily related to their objective accuracy.