How economists get tripped up by statistics | Felix Salmon
Look at this scatter chart. There will be a quiz. Another dot is
going to be added to this chart, in line with the distribution you see
here. You get to choose what the X value of the dot is — and your aim is
to get a Y value of greater than zero. So here’s the question: at what
value of X are you going to have a 95% chance of getting a dot above the
axis, in positive territory on the Y axis?
Emre Soyer and Robin Hogarth of the Universitat Pompeu Fabra, in
Barcelona, recently asked a group of economists that question — all of
them were faculty members in economics departments at leading
universities worldwide. There’s a right answer: it’s 47. And there’s a
spectacularly wrong answer: anything less than 10. The economists being
asked the question are smart, highly-educated people who are intimately
familiar with regression analyses. And it turns out that as a group,
they did very well: just 3% got the question very wrong.
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