What Is The Base Rate Fallacy In Behavioral Economics?

The base rate fallacy is a phenomenon in which people have a tendency to ignore or overlook the overall probability of an event, and instead focus on specific information or details that are related to that event. This can happen when people are presented with information about an event that is relevant to a specific case or situation, and they ignore or overlook the general probability of that event happening. For example, if you are asked to estimate the likelihood of a person having a particular disease based on their symptoms, you may underestimate the likelihood if you focus on the specific symptoms rather than on the overall prevalence of the disease in the population. The base rate fallacy can lead to errors in judgment and decision-making, as it can cause people to overlook important background information and to make decisions that are not supported by the evidence. To avoid the base rate fallacy, it is important to consider both specific and general information when making judgments or decisions, and to carefully evaluate the base rates or average rates of occurrence for a particular event or phenomenon.

Related Behavioral Economics Terms