When it comes to economic advice, people prefer charlatans to experts. So says a recent study, The Expert and The Charlatan: an Experimental Study in Economic Advice.
It asked participants a series of multiple-choice questions, with two computerised advisers suggesting answers to each. One offered expert advice, the other populist. Although participants were financially incentivised to choose the most accurate adviser, they “overwhelmingly” chose the charlatan over the expert.
Providing information regarding the charlatan’s methods “hardly helps” – even after 11 occasions where the correct answer to each question was revealed, almost half of people still chose the charlatan.
People don’t seem to come to terms with the fact that “what sounds right to them is probably incorrect”, the study says.
Paraphrasing behavioural finance expert and Nobel laureate Daniel Kahneman, the blunt conclusion is that many people "are unable to accept their ignorance".
