Monday, August 3, 2015

Expanding the Role of Statistics to Areas Traditionally Dominated by Expert Judgment

Human Judgment Is Often Insufficient

Life is complicated and it forces people to process a large amount of information, often in real time, to make complex decisions. Humans have developed mental shortcuts, intuition, and accepted wisdom in order to avoid information overload. It’s often not possible to process all of the relevant variables, their interactions and correlations, weight them all properly, and avoid personal biases. People are also easily swayed by detailed stories, irrelevant information, and anecdotal evidence.

Studies in the cognitive and behavioral sciences have consistently shown that our brains are not up to the task. However, statistical analyses can solve these problems. Studies that date back to at least the 1950s have repeatedly shown that even simple statistical models can produce better predictions than expert judgment. Let's check out some examples that show how statistical analyses have outperformed experts.

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