Positive illusions (or how mediocrity rules?)

With bourgeois society become mediocricy, and the latest financial crisis the result of greed, incompetence, foolhardiness and a whole load of other negative human qualities possessed of bankers and others in the financial sector and other positions of influence, it is timely to ask in scientific terms exactly how the bastards manage to get away with it.

Step forward political scientist Dominic Johnson and geneticist come behavioural economist James Fowler, who in a recent issue of Nature show how positive self-image may confer an evolutionary advantage provided the rewards outweigh the risks.

Overconfidence can be foolhardy, but Johnson and Fowler argue that biased self-belief can lead one to make the right decision, whereas an unbiased self-image could result in a less than optimal outcome. This may be counterintuitive, but, as Matthijs van Veelen and Martin Nowak explain in an accompanying discussion article, the key here is to question the so-called naive economist’s idea of the way in which humans arrive at decisions.

If two individuals covet a particular resource, they can fight for it, which will be costly for them both, or only one of them may claim it. If they fight, the stronger individual will win and claim his prize, but if only one of them claims the resource, it will of course go to that person. If neither stakes a claim, both come out of the encounter empty handed.

How do the competitors make their choice in this situation? Each could assess the fighting capabilities of the other, but they are likely to have imperfect information about the other’s strength. As a result, both might back off because they overestimate the strength of their opponent, and the weaker of the two could win the prize with an uncontested claim.

Faced with such a scenario, economists, naive or otherwise, turn to perfect rationality, in which both parties have a full understanding of their situation, and can thus calculate the odds that the opponent will claim the resource. Johnson and Fowler take this further, and show how the parties may short-cut to the right decision. Each contestant decides to fight if they think they are the stronger of the two, but with a bias based on the value of the resource relative to the cost of fighting. The upshot is that overestimating one’s abilities may be worthwhile.

This is a rather simplistic précis of a complex and sophisticated game theory argument, but it should serve as a basic illustration. The question uppermost in my mind is: what happens when a societal mass of mediocre individuals occupying management positions adopts such a biased strategy? Could this be the evolutionary mechanism by which the scum rises to the top?

Further reading

Dominic DP Johnson & James H Fowler, “The evolution of overconfidence”, Nature 477, 317 (2011)

Matthijs van Veelen & Martin A Nowak, “Selection for positive illusions”, Nature 477, 282 (2011)