Thinking Economics

Thinking Economics

Most human behaviour can be viewed through an economic lens to identify trends, patterns, biases and misconceptions. This column assesses Nigerian behaviour by applying Economics to behaviour and behaviour to Economics.

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The Statistical Errors That Explain Our Behaviour

Chuba Ezekwesili

Chuba Ezekwesili

Chuba is a data analyst & the co-founder of Akanka - a global design firm.

My colleague planned on going to school last year, but unlike others, she only applied to her first choice school. My colleague had prayed, so believed that she would get into the one school she applied to. Unfortunately, she got rejected. Having optimistically banked on one school, she had been turned down. To me, it did not sound like a very clever strategy to adopt in the first place. However, the more I considered it, the more I realised that her action was but a reflection of what many of us – on an individual, state and national level – do.

As humans, we find it hard to apply statistics in everyday life, and so we often make mistakes. We make two types of errors commonly known in Statistics as Type I errors and Type II errors: a Type I error, or false positive, is believing a pattern is real when it is not; a Type II error, or false negative, is not believing a pattern is real when it is. Here is another way of looking at it: If you believe that a condition is present when it is actually not present, that is a Type I error. Meanwhile, when a test result indicates a condition is not present, when it actually is, that is a Type II error.

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