Social Sciences
a year ago

Overconfidence and loss aversion: Evolution's balancing act in decision-making.

Talking the talk, not walking the walk: The co-evolution of overconfidence and loss aversion
Christopher Dawson, David de Meza

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Humans have two main biases: overconfidence and loss aversion. Overconfidence makes us believe in ourselves more than we should, while loss aversion makes us fear losing things. These biases seem to cancel each other out, but they actually work together. Overconfidence helps us influence others positively, but can lead to bad decisions. Loss aversion steps in to correct these mistakes better than just being afraid of risks. So, these biases actually help us make better decisions in the end.