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Affirmation Bias Could Cost You Money

Who remembers the cries that oil would soon approach $200 a barrel?  Today it closed at $40 a barrel:NEW YORK (Reuters) - Oil prices dropped to their lowest in more than four years on Wednesday after OPEC announced a record supply cut that dealers said may fail to fully offset slumping world energy demand.U.S. crude oil prices fell $3.54 to settle at $40.06 a barrel after dipping below $40 for first time since July 2004. London Brent fell $1.12 to $45.53.More here.  Why isn't the media all over this story?  No, the story is not that oil is trading at $40.  The story is that people were predicting that it would be trading at $200.  The problem, of course, is affirmation bias.Affirmation bias is a cognitive bias most people have that causes us to prefer yes to no, to prefer affirmation rather than negation...continue to full post

Full post as published by Crime & Federalism on December 17, 2008 (boomark / email).