Noise: A Flaw in Human Judgment

by Daniel Kahneman

Here is an example. In the United States, federal agencies must compile a formal regulatory impact analysis before they issue expensive regulations designed to clean the air or water, reduce deaths in the workplace, increase food safety, respond to public health crises, reduce greenhouse gas emissions, or increase homeland security. A dense, technical document with an unlovely name (OMB Circular A-4) and spanning nearly fifty pages sets out the requirements of the analysis. The requirements are clearly designed to counteract bias. Agencies must explain why the regulation is needed, consider both more and less stringent alternatives, consider both costs and benefits, present the information in an unbiased manner, and discount the future appropriately. But in many agencies, government officials have not complied with the requirements of that dense, technical document. (They might not even have read it.) In response, federal officials produced a simple checklist, consisting of just one and one-half pages, to reduce the risk that agencies will ignore, or fail to attend to, any of the major requirements.