From type I and type II errors to conspiracy theories

June 18, 2009

in Market and Ideas

Scientific America explores why so many of us readily subscribe to conspiracy theories and draw conclusions from questionable patterns.  It turns out we prefer type I over type II errors.

When our ancestors still hunted in the woods, it’s better to assume that rattle came from a poisonous snake and run, than to take your chances and get bitten. As a result, natural selection favoured those that assumed all patterns were real.

In other words, evolution hearted paranoia.

[via Freakonomics]

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{ 4 comments… read them below or add one }

James June 22, 2009 at 1:25 pm

You know, it's an interesting argument, but too many 'conspiracy' theories have been proven to be true.

All one has to do is look at the history of the conspiracy of the Plunge Protection Team (which is a recent one) to realize, that there is obviously a different reality than the one the media feeds the people.

- The PPT was established under the Reagan admin to manipulate the stock market at the orders of the president. This was denied for years, but suspected my many market participants. Then, Bernanke let the cat out of the bag recently, and discussed the PPT in a Fed testimony; public record. So, were all those people who believed it existed crazy and fooled by their 'stupid and ignorant' predispositions as hunter gatherer apes, or are there truly greedy people in the world ? perish the thought……

J

James June 22, 2009 at 1:27 pm

…… and don't get me stared on statistical modeling and the Guassian assumptions …..

James June 22, 2009 at 7:25 pm

You know, it's an interesting argument, but too many 'conspiracy' theories have been proven to be true.

All one has to do is look at the history of the conspiracy of the Plunge Protection Team (which is a recent one) to realize, that there is obviously a different reality than the one the media feeds the people.

- The PPT was established under the Reagan admin to manipulate the stock market at the orders of the president. This was denied for years, but suspected my many market participants. Then, Bernanke let the cat out of the bag recently, and discussed the PPT in a Fed testimony; public record. So, were all those people who believed it existed crazy and fooled by their 'stupid and ignorant' predispositions as hunter gatherer apes, or are there truly greedy people in the world ? perish the thought……

J

James June 22, 2009 at 7:27 pm

…… and don't get me stared on statistical modeling and the Guassian assumptions …..

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