The gambler’s fallacy, framing, anchoring and hindsight bias in judicial decision-making.

The gambler’s fallacy, framing, anchoring and hindsight bias in judicial decision-making.

Months before William had moved into a new house with his wife, Sarah. They were excited about their move to their new home. William and Sarah unlocked the door to their new house and waited for the furniture removal staff to arrive at the end of their driveway. As the removal van drove up the driveway the van struck the side of William and Sarah’s car, writing the car off. Several months later William and Sarah headed to court to claim for the damages of their car against the removal company. Over many years their lawyer had learnt to be careful in the way that she words her cases in court. Their lawyer asked the judges “How much would you award the plaintiff in compensatory damages?” rather than “We are claiming ‘x’ amount from the defendant.” William and Sarah’s lawyer had learnt that framing a case in such away could exploit the framing bias.

The judicial system is one of the most important systems in all countries with a court of law. Judges play a significant role in society deciding on the outcome of many cases and setting precedencies for future cases. The public expect judges to decide on the outcome of each case fairly, without systematic errors or bias. However, like any instance where a person must make a judgement or decision judges are subject to systematic biases.

One of the most important aspects of law for many people is immigration law. Asylum judges must make decisions that can determine the fate of the individual in court. The United States offers asylum to foreign national who can (i) prove that they have a well-founded fear of persecution in their own countries, and (ii) that their race, religion, nationality, political opinions, or membership in a particular social group is one central reason for the threatened persecution. In 2016 a study by Harvard academics investigated the use of heuristics and biases in the asylum courts of the United States (Chen et al., 2016). Chen and colleagues accessed data through a Freedom of Information Act request of 699 decisions that were made by 357 judges in 45 courts from 1985 to 2013. All cases in the US are handled on a first-in-first-out basis with no quotas as to how many individuals are granted, or not granted asylum. On analysis of the data Chen et al found that judges were subject to the gambler’s fallacy. Judges were more likely to grant (or deny) asylum after denying (or granting) asylum to a previous applicant. The judges presiding over the fate of the asylum applications believes in a representation of randomness, as such, they were more likely to alternate between granting and denying asylum.

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There are many other heuristics and biases that play an important role in the judicial decisions of judges in the US these include framing (as demonstrated by William and Sarah’s lawyer), anchoring, and the hindsight bias. In a joint study with Cornell Law School researchers at a major conference issued questionnaires to 167 federal magistrates. The questionnaires contained examples of cases that a court judge would preside over. From the responses to the questionnaires Guthrie et al (2002) found that judges were subject to anchoring in personal injury claims, framing in copyright action cases, and the hindsight bias in cases of medical negligence.

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A retrospective study by Rachlinski et al (2000) examined the effect of the hindsight bias on decisions in real court cases. The hindsight bias is a mental shortcut that states that we have an inclination, after an event has occurred, to see that the event was predictable. The researchers found that judges failed to appreciate the problems associated with judging an event from hindsight. One example (Chase v. Pevear) from the Supreme Judicial Court of Massachusetts decided that the trustees of two high risk investments should have known the outcome of the investments with a nearly omniscient ability. In the case of First Alabama Bank v. Martin the Alabama Supreme Court held that another group of high risk, high yield equities were speculative, as shown by the fact that trustees lost money by selling ‘at the bottom of the market.’ The courts in both cases assumed that the investors should have known that the price of the equities were recovering, and hence the trustees should not have sold them. One court even held a trustee liable for failing to predict the stock market crash of 1929.

The public expects our judges to make well balanced judgements and decisions without falling for cognitive biases. As humans tasked with make important decisions the judicial system is not isolated from any of the shortcuts that we use to make decisions. For William and Sarah seeking their compensation for the damage to their car the experience that their lawyer had with the framing bias came in useful. In many of other cases, such as with the example of the gambler’s fallacy in the asylum courts these cognitive biases and mental shortcuts can become problematic. We have seen how the framing bias, anchoring heuristic and hindsight bias are all important when making decisions, even at the highest levels of decision-making in society.

 

 

 

How do we make decisions quickly when placing bets in a casino?

How do we make decisions quickly when placing bets in a casino?

Like many tourists, Rebecca and Catherine always wanted to visit Las Vegas. They took in the dazzling sights of the bright lights, enjoyed the stage magic and drifted into one of large casinos. When they walked into the casino they were amazed by the sounds and lights. Catherine had always enjoyed the game of roulette so headed straight to the roulette table. Catherine placed three consecutive bets, losing all three. Watching this Rebecca quietly said to Catherine “Maybe you should try another game, the odds are against you winning.” To this Catherine replied “No, I have lost three times I am overdue a win, I will win soon.”

When we make decisions, we like to think that we make all of our decisions rationally. Casino environments are designed to be one of the most complex environments that we ever encounter, there are colourful, flashing lights, loud machines playing music and people cheering. It is hard to deal with the environment, tune-out and make clear decisions. To deal with complex environments the brain has developed a number of judgement heuristics. Judgement heuristics are mental short cuts that enable us to make quick decisions whilst ignoring part of the decision-making environment. One classic example of a judgement heuristic was given by Catherine above when speaking to Rebecca at the roulette table. The aptly named gambler’s fallacy, as demonstrated above can also be seen in the following classic scenario. Imagine that someone is flipping a coin multiple times, the coin lands head side up three times in a row. Someone watching the coin flipping is asked to guess whether the next coin will land head side up or tail side up. If the person guesses tail side up they are using the gambler’s fallacy, a belief that randomness follows a pattern. Many people believe that for the coin flipping to be truly random the outcome of a sequence of five coin flips must be something like HEADS-TAILS-HEADS-TAILS-HEADS. If an outcome of five flips is HEADS-HEADS-HEADS-HEADS-HEADS then the coin is overdue to land with the tail side up otherwise this is not random. The belief in a pattern of randomness persists in most areas of life.

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In a field study by researchers at the University of Navada 18 hours worth of overhead security camera footage of a roulette table was obtained from a large Reno casino, consisting for 904 bets (Sundali & Croson, 2006). The researchers watched all of the bets and coded the patterns of betting for every gambler that sat down at the table. On an American-style roulette table there are 36 different sections of the roulette wheel, coloured as red or black (European-style roulette has 37 sections). Players can bet on more than one number and colour by placing their chips on the corners or side of each of the numbered squares. If a gambler bets randomly then after the researchers coded each bet there should be a 2.6% chance that a bet would fall on each number. The researchers found that after an outcome of RED-RED-RED gamblers responded with a gambler’s fallacy type logic by betting on BLACK. Like Catherine above and the coin flipping above, the gamblers believed in a representation, or pattern of randomness.

A study by Gal and Baron in 1996 investigated the gambler’s fallacy in a laboratory-based experiment. Gal and Baron examined whether a change in betting strategy was due to boredom by asking participants why they choose to bet in the way that they did. Most of the participants in the Gal and Baron study responded by saying that they were attempting to maximize their earnings by using the gambler’s fallacy-type logic. It would appear that the gambler’s fallacy is not simply caused by boredom.

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Besides gambling at the roulette table other casino games in which heuristics play a major role include the craps table and fruit machines. One prominent heuristic at the craps table is the belief in illusory correlations. When rolling the dice at the craps table gamblers often blow on the dice for luck or roll the dice softly in the belief that a low number will come up, and roll the dice harder when they want a higher number (Griffths. 1994). These gamblers believe that if a number comes up that they did not want then they did not through the dice hard or soft enough.

Cognitive short cuts as heuristics are used in every area of life where decisions need to be made. With respect to gambling, heuristics have been documented in fruit machine users, and at the poker, blackjack, roulette and craps tables. Even when betting on horse or dog races gamblers reliably use these mental short cuts (Terrell, 1998). I have highlighted two of uses of heuristics above, namely the gambler’s fallacy and illusory control. Like Catherine above many people fall for these heuristics and make sub-optimal decisions based on incorrect beliefs. When it comes to gambling, there are two ways to avoid these cognitive traps. If gambling alone take your time to think about the decisions that you want to make. When gambling in a group of with a friend you could listen to the advice of your friend as Catherine should have above.