Why Cognitive Science Matters to Actuarial Science
By James Guszcza
Highly intelligent women tend to marry men who are less intelligent than they are.
Is this provocative statement true, and, if so, why? Perhaps sociological, anthropological,
or even biological or evolutionary factors are at play. Maybe literary or pop cultural images,
such as high-powered lawyer Miranda Hobbes from TV’s Sex and the City settling down in
Brooklyn with her easygoing boyfriend, can provide some illumination.
Now consider the statement, “The correlation between the
intelligence scores of spouses is less than perfect.” This bland
proposition is obviously true and hardly interesting enough to
keep you reading further. Yet it is equivalent to the sentence
that got you to this point in the article.
This seeming paradox hints at a deep body of scientific discoveries that in recent decades has profoundly affected our
understanding of human cognition, decision-making under
uncertainty, the perception of risk, the efficiency of markets,
and even the sources of human happiness.
One of the two men who initiated this field of study,
Daniel Kahneman, summarizes the work begun by him and
his late collaborator, Amos Tversky, in an extraordinary new
book, Thinking, Fast and Slow (from which I took the opening
example). The work on human cognition by Kahneman,
Tversky, and their followers in recent decades is so profound
and far-reaching that Harvard linguist Stephen Pinker (in
an edge.org master class) ranked it high on the list of things
all educated people should know. And much of this work is
particularly relevant in domains that involve quantifying
uncertainties and managing risks.
guilt for the Past and Built to Last
Of course neither cultural anthropology nor biology is needed to
explain why intelligent women marry less intelligent men (and
vice versa). This is simply an instance of regression to the mean.
Although regressive phenomena are all around, people tend to
be blind to them. In his book, Kahneman relates a memorable
story about his attempt to convince a group of flight instructors
in the Israeli Air Force that rewarding improved performance
is more effective than punishing mistakes. One of the more sea-
soned instructors was skeptical, pointing out that cadets who
had been praised for a well-executed acrobatic maneuver tend-
ed to perform worse the following time; whereas cadets who
had been chided for poor execution tended to do better on the
next try. Kahneman’s reflection on this episode is characteristi-
cally insightful. This eureka experience, he writes:
…was a joyous moment, in which I understood an impor-
tant truth about the world: because we tend to reward
others when they do well and punish them when they do
badly, and because there is regression to the mean, it is part
of the human condition that we are statistically punished
for rewarding others and rewarded for punishing them.