Daniel Kahneman won the Nobel Prize in Economics.  He is a psychologist.  He is one of the people who created the field of behavioral economics.  We make judgments of value and decisions based on those judgments, with little data.  We don’t know as much as we think we do.   Despite our ignorance, we make decisions as if we knew more than we do.  Daniel Kahneman’s work (among others) show us why we are wired to make bad decisions.  The problems / puzzles below are taken from his work.  References will be found at this link: References

For example, we judge people and situations based on their degree of “representativeness”.  We also fail to understand the role of sample size in the probability of random events.

Old white guys with gray hair, wearing a suit and tie, don’t seem “the type” to be bank robbers.  So, if we see such a person in a line up, we are not likely to assume that person is a bank robber.  He “doesn’t look like” a bank robber. (Someone wrote, “the best way to rob a bank is to own it.”)  If you have 3 teenagers, and 3 “biker dudes” in their leathers with their beer, and three guys in pin stripe suits, which group is more likely to have taken the money from your bank account? The three guys in suits are all bankers, the teenages all look like computer geeks and the dudes look like, well, dudes.  They guy (or guys) who took your money do belong to one of the three groups.  Which one?

Taking up the issue of sample size, we have hospital A and hospital B.  A is 2 times as large as B.  Assume Hospital A does twice as many deliveries, each day, as Hospital B.  At the end of the year, each hospital has almost exactly 50% boys born and 50% girls.  On any given day, however, either or both of them may have slightly more boys than girls born, or vice versa.

The questions is: Which hospital A (bigger) or B (smaller) is more likely, on any given day, to have more than 60% of babies born that day be boys?  Is one more likely than the other, or does it matter?

The answer to each of these questions will be posted in a day or so and will be at this link: Answers