Judgment under Uncertainty: Heuristics and Biases - Essay Example

HEURISTICS AND BIASES (Judgment Under Uncertainty) ID Number: of School (University)Word Count: 341Date of Submission: September 15 2011JUDGMENT UNDER UNCERTAINTYThe authors thesis is that although using heuristics can be extremely useful for making quick and easy decisions, care must be taken when doing so. This is because it can lead to wrong conclusions and potentially harmful decisions as heuristics is largely influenced by our biases. It can be useful when people do not have complete data and they decide based on their biases that in turn was derived from their daily experiences.

In other words, heuristics can be pretty much of a subjective exercise in decision making (Tversky & Kahneman 1124). The situation can be best described as error-prone and exemplified by the expression, “jumping to wrong conclusions.” An over-reliance on intuition may not always work out to the best outcomes. The probability of error being committed can be reduced by using knowledge from experience (the “rule of thumb” way) but this does not guarantee anything at all. Another is using trial-and-error to get a decision.

The use of either method translates to what is called as intelligent guesswork, but it still is guesswork. Heuristics is more on the theory of attribute substitution (Gilovich, Griffin & Kahneman 49).Heuristics can be likened to the term “common sense” but almost everybody knows it is just a speculative approach to problem solving; again, as exemplified by the expression that often common sense is not so common at all. I find the third heuristic expounded on by the authors to be the most interesting.

This third heuristic is based on the concept of anchoring and adjustments (ibid. 1128) and that had hurt me most in my forex activities (foreign exchange trade) betting on the future value of the United States dollar. About three years ago, the dollar was so weak it was better to hold euros as a speculative investment against the dollars continued devaluation but the situation is now reversed, partly due to the sovereign debt crisis in Europe. An example in which I fell victim to heuristics is not bringing an umbrella when sunny but then it rains unexpectedly.

Works CitedTversky, Amos and Daniel Kahneman. “Judgment under Uncertainty: Heuristics and Biases.” Science 185.4157 (27 Sept. 1974): 1124-1131. Print.Gilovich, Thomas, Griffin, Dale W. and Daniel Kahneman. Heuristics and Biases: The Psychology of Intuitive Judgment. New York, NY, USA: Cambridge University Press US, 2002. Print.