Posted by: CJ | December 17, 2012

DeLong’s Interesting Point

In an interview (with a slightly annoying host with a way-too-loud mic), Brad DeLong made an interesting point. For someone to become  a senator, they have to have gotten lucky. But not just lucky, they must have gotten lucky many, many times in their lives.

So the basic idea is the following. Suppose we decide who becomes senator based on flipping a coin. Let’s assume it’s a fair coin, and there are 300 million people in the US. Then we’d get 100 people for senate by letting everyone flip a coin 21 times and saying whoever gets all heads becomes a duly elected senator.

So what’s the effect of this? Even with just coins the person would start to think they had a special skill. But in real life they’ll get lucky in more complicated ways. And as a result a senator will (1) think they’re smarter and more talented than they are, and (2) always be over-optimistic. Because if you’ve just flipped heads 21 times in a row you’ll think you can do it again without a problem. This combination of over-estimation of their abilities and over-optimism about outcomes is proving to be very toxic…either one would be bad enough, but the combination is awful.

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