Statistics: base rate fallacy, part 2: belief vs disbelief
Tutoring statistics, so many inroads are available. The tutor continues about the base rate fallacy.
Continuing from my post yesterday, I’ll explore a connection to it: believing what you see, vs not.
The base rate fallacy means that people believe what they see even if, statistically, it’s unlikely or impossible. The base rate means how likely, or unlikely, the observation is given “real life.” The fallacy means believing your observation even in spite of its remote likelihood.
Yet, a limit of statistics is that they don’t tell what’s happening, just how likely it is.
Here’s an example: oil hit -37.30 on April 20, 2020. I’ve never heard of oil being negative, so statistics tell me that it’s so unlikely, I shouldn’t believe it even if I see it. Yet, it happened.
Someone avoiding the base rate fallacy will dismiss an event that shouldn’t be possible, even if they see it: “I saw a ghost, but of course they don’t exist, so I couldn’t have seen one.” If that person comes to believe in ghosts because they saw one, they’re “falling for” the base rate fallacy.
So, did everyone just imagine oil prices were negative?
Source:cnbc.com Oracle Tutoring by Jack and Diane, Campbell River, BC.