What is the Base Rate Fallacy?
In simple terms, it’s a common error we make in assessing likelihoods due to (a) over-emphasizing the rate of something within a group and (b) under-emphasizing how common that group is in the first place (i.e., the base rate).
For example, let’s say you see a chess set in a building with 1 avid chess player and 1000 other people. You might assume it belongs to the chess player, even though it’s more likely to belong to one of the others because there are so many of them – if only 1% of regular people own chess sets, there would likely be ~10 of them in a group of 1000, outnumbering the 1 chess player.
Sometimes also referred to as Base Rate Bias or Base Rate Neglect, this is a cognitive bias arising from the tendency to place too much emphasis on event-specific information, at the expense of relevant base rate information. Often this results in a sense of probabilities or rates that are very far from reality!
To understand what this means, let’s look at a few more examples:
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