Economics is about making decisions based on the limited options and resources we have. And since most of our decisions are based off the correlation between our actions and the effect, such correlations are important. However, they become flawed and costly over time when our biases influence us into seeing such correlations as causes. We take Panadol (Painkiller) because we believe it’ll take care of our headache. That’s a correlation, not a causation. The headache could have been alleviated because you got some rest, drank some water, or ate some food. So yeah, correlation does not imply causation. Repeat that to yourself over and over again.
You’ll need to remember it as you live life in Nigeria or any other African country where a majority of decision are made based off superstitions, emotions or assumptions. Nigerians have a habit of confusing correlation with causation. We enter into the assumption that the pattern we happen to see solely explains the situation. And we do this while ignoring or refusing to search for other evidence that might disconfirm our hypothesis. Essentially, we see what we choose to see. This phenomenon is known as confirmation bias.
Hmm..I wonder if this ever worked
It’s why Nigerian Christians assume that if they had a Christian president, the nation would progress economically (By the way, how’s that working out for us now?) and the Muslims believe the same of a Muslim president. Also, some of us don’t shake with our left hands because we believe it’s bad luck. What’s the correlation between left hand and back luck? Zero. These are examples of confirmation bias that makes us draw connections where none exist.
Another prevalent example in Nigeria: a woman who goes mad. We conclude that some evil witch in the village caused her mental illness. So, the family spends exorbitant amounts of money on ‘healers’ that can free her of her demons. However, once she’s diagnosed with Schizophrenia and given the right medication, she gets better. Yet, we still hold on to our confirmation biases in spite of the clear and irrefutable evidence. And this happens because we choose to look at the indicators we’re biased towards rather than the factual measurable ones.
The average Governor or Minister builds 20 schools or buys 10,000 iPads for the students and blows his/her horn on the assumption that education has improved due to his/her effort. All everyone sees are the new buildings. However, he/she takes that as a great indicator of academic improvement. So because he/she sees the result he/she has set out to find, he/she finds that result, when instead, the real marginal effect of the policy is ignored. A smarter way to tease out the real effect would be to find out the marginal number of students who passed the WAEC exam. But then, shiny new buildings make for better news headlines and 4 hour-long documentaries on AIT.
It’s also why our top finance gurus in Nigeria can boldly say that a rise in GDP explains the supposed economic development of the nation…That’s either an intense dose of confirmation bias; an outstanding ignorance of economics and disregard for the Human Development Index or an amazing talent for lying. I’d say a cocktail of all, considering how the World Bank’s report and well…the average Nigerian’s life seems to be asynchronous to that of the Government’s opinion on how Nigerians are faring economically.
Unfortunately, it doesn’t just end at us making wrong decisions due to our biases. For every wrong decisions made, there is an opportunity cost. And this opportunity cost is a function of time. So the nation gets stuck with a president who doesn’t “give a damn” for the next 2 years (and potentially more). The schizophrenic woman’s family keeps spending valuable resources in vain on spiritual healers; the kids leave the shiny new schools with no academic knowledge; and Nigeria eventually combusts from the burgeoning inequality in the midst of our rising GDP. Essentially, for every single second that we stick to a biased notion, the cost of such an action increases. In mathematical terms, I suppose it would look like this:
Total Cost of Bias= Cost of Action + Opportunity Cost
Where: Opportunity Cost (t)= (Benefit from Right Decision) x (Time)
So, Nigerians, because it barks like a dog doesn’t mean it’s a dog. And if you don’t know what a dog looks like, Google it. A few seconds of research or finding an established indicator can save you from a lifetime of horrid decision-making due to confirmation bias.
Oh…and by the way, I added the equation because research shows that people perceive a work to be more credible/intellectual when it’s got an equation…..even if the equation doesn’t make any sense. How about that for correlations and causations, eh? 😉
Look at the Big Picture, People!
NB: I would love to hear of other instances of confirmation bias you’ve encountered in the comment section! Cheers.