Philosophy, science and free markets
a) Explain in your own words what the confirmation bias is (+/- 100 words)
Confirmation bias is when people search for information and interpret it in such a way that they
want it to be true, favoring the information that approves what they already believe in. They
stop gathering information when their belief is verified, ignoring the other side of the story. This
way, instead of researching the topic and finding the ideal solution to their problem, individuals
end up with incomplete assumptions or information, leading to irrationality. Hence,
confirmation bias advocates that people often do not interpret situations objectively.
b) Give an example from everyday life in which the confirmation bias leads to irrational
decisions or judgments (it may also be fictitious). (+/- 200 words)
An example of the confirmation bias from everyday life can be when investors buy stocks.
Assume that an investor reads an article that says that there is a stock in the market that will do
very well if you buy it now. Afterwards, he goes and researches on the internet about this stock
and reads only at the articles which say that the stock’s price will rise substantially in a short
time, ignoring other articles which say that this stock is not very stable and fluctuates a lot.
After the research, he decides to buy the stock and hold it for at least 1 year. But since the stock
was very unstable its price gradually decreases during the one year, so the investor lost his
principal. This happened because the investor didn’t do enough research for the stock and he
ignored many other articles which suggested not to buy the stock, so the investor was irrational
and it leads him into wrong decisions.
c) Explain Karl Popper's demarcation criterion and explain why it protects against the
confirmation bias in science. (+/- 200 words)
Karl Popper’s demarcation criterion is the tool to differentiate between science and pseudo-
science. In order to do that he introduced the logical concept of falsifiability. In this way, for a
theory to be considered as empirically correct, it should be able to make some predictions that
can be tested against experience.
In the area of natural sciences, scientists do not just abandon their theories whenever they
conflict with the observational data, however, they look for ways to prove them instead of
discarding them. Popper believes that scientific theories do not give absolute certainty, and
that a single experiment can falsify a theory, no matter how many times the theory has been
proven correct. For example the theory that ‘all swans are white’. To test this theory individuals
can easily go to lakes and rivers and find evidence to support it. With every white swan that
every individual encounters the theory becomes stronger. The question that remains is: how
many swans do you have to find to reach absolute certainty? But only one single swan of a
different color will prove your theory wrong. This does not mean that these scientific theories
are wrong, but according to Popper’s falsification principle, scientific theories are only correct
until they are proven wrong. This falsification principle protects theories against confirmation
bias because scientists will no longer be only looking at data that only confirms their theories,
but also test whether their theories can be falsifiable.
a) Explain in your own words what the confirmation bias is (+/- 100 words)
Confirmation bias is when people search for information and interpret it in such a way that they
want it to be true, favoring the information that approves what they already believe in. They
stop gathering information when their belief is verified, ignoring the other side of the story. This
way, instead of researching the topic and finding the ideal solution to their problem, individuals
end up with incomplete assumptions or information, leading to irrationality. Hence,
confirmation bias advocates that people often do not interpret situations objectively.
b) Give an example from everyday life in which the confirmation bias leads to irrational
decisions or judgments (it may also be fictitious). (+/- 200 words)
An example of the confirmation bias from everyday life can be when investors buy stocks.
Assume that an investor reads an article that says that there is a stock in the market that will do
very well if you buy it now. Afterwards, he goes and researches on the internet about this stock
and reads only at the articles which say that the stock’s price will rise substantially in a short
time, ignoring other articles which say that this stock is not very stable and fluctuates a lot.
After the research, he decides to buy the stock and hold it for at least 1 year. But since the stock
was very unstable its price gradually decreases during the one year, so the investor lost his
principal. This happened because the investor didn’t do enough research for the stock and he
ignored many other articles which suggested not to buy the stock, so the investor was irrational
and it leads him into wrong decisions.
c) Explain Karl Popper's demarcation criterion and explain why it protects against the
confirmation bias in science. (+/- 200 words)
Karl Popper’s demarcation criterion is the tool to differentiate between science and pseudo-
science. In order to do that he introduced the logical concept of falsifiability. In this way, for a
theory to be considered as empirically correct, it should be able to make some predictions that
can be tested against experience.
In the area of natural sciences, scientists do not just abandon their theories whenever they
conflict with the observational data, however, they look for ways to prove them instead of
discarding them. Popper believes that scientific theories do not give absolute certainty, and
that a single experiment can falsify a theory, no matter how many times the theory has been
proven correct. For example the theory that ‘all swans are white’. To test this theory individuals
can easily go to lakes and rivers and find evidence to support it. With every white swan that
every individual encounters the theory becomes stronger. The question that remains is: how
many swans do you have to find to reach absolute certainty? But only one single swan of a
different color will prove your theory wrong. This does not mean that these scientific theories
are wrong, but according to Popper’s falsification principle, scientific theories are only correct
until they are proven wrong. This falsification principle protects theories against confirmation
bias because scientists will no longer be only looking at data that only confirms their theories,
but also test whether their theories can be falsifiable.
