Why the Experts Don’t Rule the World?

February 25, 2010 • Posted in Investing Expertise, Sentiment Indicators

Why does the public resist the wisdom of scientific consensus on “questions only they [scientists] are equipped to answer?” In their February 2010 article entitled “Cultural Cognition of Scientific Consensus”, Dan Kahan, Hank Jenkins-Smith and Donald Braman examine the tendency of individuals to perceive risk with biases congenial to their visions of how society should be organized. The authors focus on the examples of climate change, disposal of nuclear waste and the effect of permitting concealed possession of handguns. They measure individual cultural predisposition along two dimensions: hierarchy versus egalitarianism, and individualism versus communitarianism. Using results of an online survey of 1,500 U.S. adults during July 2009, they conclude that:

The authors determine “scientific consensus” based on U.S. National Academy of Sciences expert consensus reports, as follows:

  • The “National Research Council Committee on Analysis of Global Change Assessments 2007″ concludes that global temperatures are increasing and that human activity is causing global warming.
  • The “National Research Council, Board on Radioactive Waste Management 1990″ concludes that disposal of radioactive waste from nuclear power plants in deep underground storage facilities is safe.
  • The “National Research Council Committee to Improve Research Information and Data on Firearms 2004″ concludes that studies on whether permitting adults without criminal records or histories of mental illness to carry concealed handguns in public decreases violent crime are inconclusive.

Survey results indicate that:

  • There is a strong relationship between cultural values and perceptions of scientific consensus on risks. Hierarchical individualists significantly disagree with egalitarian communitarians about the state of expert opinion on climate change, nuclear waste disposal, and handgun regulation (see the chart below). Both groups seem to fit perceptions of scientific consensus to their values.
  • Individuals tend to overestimate the degree of scientific support for their cultural predispositions due to bias regarding how readily they can recall instances of expert agreement/disagreement.
  • Individuals tend to skew assessments of the knowledgeability and trustworthiness of an expert based on whether the expert agrees or disagrees with their cultural predispositions.

The following chart, taken from the paper, indicates percentages of subjects by broad world view (Hierarchical Individualist or Egalitarian Communitarian) who selected “most expert scientists agree”, “most expert scientists disagree” and “expert scientists are divided in their views” on each of the four consensus positions. (Perhaps loose interpretations of the extremes of the Hierarchical Individualist – Egalitarian Communitarian cultural spectrum are “libertarian” and “socialist.”)

  • A majority of Egalitarian Communitarians believe that most expert scientists agree that global warming is occurring and is caused by humans. In contrast, most Hierarchical Individualists believe that scientists are divided on/disagree with these judgments.
  • Pluralities of both Hierarchical Individualists and Egalitarian Communitarians believe that expert scientists are divided on whether geologic isolation of nuclear wastes is safe. Hierarchical Individualists (Egalitarian Communitarians) are more likely to believe that that expert scientists agree (disagree) with this position.
  • A plurality of Hierarchical Individualists (Egalitarian Communitarians) believe that most expert scientists agree (disagree) that permitting citizens to carry concealed handguns in public reduces crime.

In summary, investors may want to consider how their cultural predispositions affect their processing of reported views of experts on financial markets.

It might be interesting to benchmark cultural biases with beliefs about the following related propositions:

There are many examples of past expert consensuses that proved to be substantially in error.

Complex systems are extremely messy and difficult to model, arguing for skepticism about consensus forecasts.

Experts are human and groups of experts are sociological, inherently tending to seek prestige and access to/control of resources. Skepticism about the intellectual purity of any expert or expert consensus is therefore warranted.

Note that investigations of financial markets sentiment, whether expert or not, generally treat consensus as indications of instability and pending reversal (not correctness).

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