What Is Hindsight Bias In Behavioral Economics?

Hindsight bias, also known as the “knew-it-all-along” effect, is the tendency for people to see events that have already happened as being more predictable than they actually were. This means that after an event has occurred, people often believe that they could have easily predicted what would happen, even if there was no reason to believe it at the time.

Hindsight bias can lead people to overestimate their own knowledge and abilities, and can also make it difficult for them to learn from their mistakes. For example, if someone makes a poor decision and then experiences a negative outcome, they may blame themselves for not seeing the outcome coming. However, if they had been able to consider the decision without the benefit of hindsight, they might have made a different choice. This can make it difficult for people to evaluate their own decision-making processes and improve them over time.

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