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One of the most enjoyable types of academic exchange is that of type 17a, in which one group of scholars argues that a psychological tendency is irrational and another group argues that the same tendency is reasonable. It can be even more fun when the groups belong to different fields. If these two assertions are true, we are in for a treat this week as DSN has become aware of a working paper by economists Jean-Pierre Benoît (London Business School) and Juan Dubra (Montevideo) that finds nothing wrong with the idea that most people rate themselves above average.
Many studies have shown that people display an apparent overconfidence. In particular, it is common for a majority of people to describe themselves as better than average. The literature takes for granted that this better-than-average e¤ect is problematic. We argue, however, that, even accepting these studies completely on their own terms, there is nothing at all wrong with a strict majority of people rating themselves above the median.
It is interesting to see the term “nothing wrong” in the abstract. Decision Science News enjoys papers of type 17a, but it feels that there is too much focus on what is rational / irrational / right / wrong and too little focus on models that capture what people do: the overconfident, the underconfident, and the calibrated. After all, right or wrong are all defined with respect to normative standards, and such norms 1) change over time and 2) are often borrowed from fields (such as probability and statistics), that don’t speak with a single normative voice, but comprise multiple (often irreconcilable) views.
Figure credit: Pilot study by Lionel Page and Dan Goldstein