# The Base Rate Fallacy

From: Elliott, Mark (MAE195@psy.soton.ac.uk)
Date: Fri May 24 1996 - 11:50:41 BST

WHAT IS THE BASE RATE FALLACY :

The Base Rate Fallacy is the belief that probability rates are false.
When presented with statistics about the population as a whole, people
tend to ignore them and think about themselves as completely different
entities. For example someone has the symptoms of a disease which takes
two forms, both fatal, requiring two different medicines. Only one
medicine can be taken and medicine A does not work for form B of the
disease and medicine B does not work for form A of the disease. Form A
of the disease occurs 10% of the time in the population whilst form B
occurs 90% of the time. After taking an 80% reliable A/B test it says
that this person has form A of the disease. Therefore this person is
likely to take the treatment for form A of the disease dispite a 20%
chance that he could have form B and only 10% of people in the
population have form A. This is because people are not concerned with
statistics, they are concerned with themselves.

People can learn base rate probabilities quicker through experience
where-by a penalty is incurred each time they act in a certain way.
For example if people were told that a fruit machine gave out a lot of
money each time it was played on, they would probably think it was a
lie and ignore the base rate. However if they had a go on it and won
some money they are more likely to believe it and carry on playing.
Therefore it can be wrong to ignore base rates.

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