Hindsight bias: practical relevance

Every-day life provides numerous examples on the practical relevance of hindsight bias. This was shown in a medical context. A GP´s second opinion does not differ completely from another GP´s opinion, if he/she is aware of the first opinion. This seems to be of serious consequence if one considers that a second opinion is only required when serious illnesses have been diagnosed.

In a legal context, hindsight bias was found to occur when a jury makes a final decision in court. In the course of a trial, the judge is empowered to order the jury to ignore certain testimonials, by disallowing them. It has been proven impossible to ignore such information.

Hindsight bias also plays a role in an economic context. An economic expert may, for example, analyze certain share activity, as if he/she had always known what would happen. This results in them forming a higher opinion of their own judgement. This in turn can have a long-term, restrictive effect on their individual learning capability as well as future decision-making. In addition to this intra-personal effect, it is possible for inter-personal effects to arise. Example: A supervisor may no longer be able to make an undistorted judgement on his employees´ decision-making if he/she got information about some results of their performance. This is a special problem in the case of poor outcome because it could happen, despite them having acted correctly on the information they were given at the time.

Return to: implications for further research

Literature: Arkes, Wortmann, Saville & Harkness (1981), Mangelsdorff (1995), Sue, Smith & Caldwell (1973)

Entry by: Stefan Schwarz

June 11, 1999
Direct questions and comments to: Glossary master