Hindsight Bias

The hindsight bias, although not hitherto named as such, was not a new concept when it emerged in psychological research in the 1970s. In fact it had been indirectly described numerous times by historians, philosophers and physicians. In 1973 Baruch Fischoff attended a seminar where Paul Meehl stated an observation that clinicians often overestimate their ability to have foreseen the outcome of a particular case, as they claim to have known it all along. Baruch, a psychology graduate student at the time, saw an opportunity in psychological research to explain these observations.

In the early seventies investigation of heuristics and biases was a large area of study in psychology, led by Amos Tversky and Daniel Kahneman. Two heuristics developed by Tversky and Kahneman were of immediate importance in the development of the hindsight bias, and these were the availability heuristic and the representativeness heuristic. In an elaboration of these heuristics, Beyth and Fischoff devised the first experiment directly testing the hindsight bias. They asked participants to judge the likelihood of several outcomes of U.S. President Richard Nixon’s upcoming visit to Peking (also known as Beijing) and Moscow. Some time after President Nixon’s return, participants were asked to recall, or reconstruct the probabilities they had assigned to each possible outcome, and their perceptions of likelihood of each outcome was greater or overestimated for events that actually had occurred. This study is frequently referred to in definitions of the hindsight bias, and the title of the paper, “I knew it would happen”, may have contributed to the hindsight bias being interchangeable with the term “knew it all along” hypothesis.

In 1975 Fischoff developed another method for investigating the hindsight bias, which at the time was referred to as the creeping determinism hypothesis. This method involves giving participants a short story with four possible outcomes, one of which they are told is true, and are then asked to assign the likelihood of each particular outcome. Participants frequently assign a higher likelihood of occurrence to whichever outcome they have been told is true. Remaining relatively unmodified, this method is still used in psychological and behavioural experiments investigating aspects of the hindsight bias. Having evolved from the heuristics of Tversky and Kahneman into the creeping determinism hypothesis and finally into the hindsight bias as we now know it, the concept has many practical applications and is still at the forefront of research today. Recent studies involving the hindsight bias have investigated the effect age has on the bias, how hindsight may impact interference and confusion, and how it may affect banking and investment strategies.