Humans are imperfect, inconsistent decision-makers

Noise. By Daniel Kahneman, Olivier Sibony and Cass Sunstein. Little, Brown; 464 pages; $32. William Collins; £25

NOISE IS UNWANTED variation in judgments that should be identical, which leads to inaccurate and unfair decisions. It is all around people all the time, though individuals fail to notice it. To get a sense of how it happens, perform a “noise audit” right now: open your phone’s stopwatch app and practice counting ten seconds. Now, with your eyes closed, count several times, hitting the lap button each time you believe ten seconds have elapsed.

Your answers weren’t perfect but noisy: slightly above or below the ten-second mark. And if they were consistently wrong in one direction, then there is bias too, which is a different form of error (you counted too quickly or slowly).

The problem of bias in decisions is well known and there are strategies that people can adopt to minimise it. For example, customers may be “anchored” on the first price they are presented with in a transaction, so they learn to consciously discard it before they negotiate. But noise is different precisely because it is less apparent. “It becomes visible only when we think statistically about an ensemble of similar judgments. Indeed, it then becomes hard to miss,” Daniel Kahneman, Olivier...