Cultural differences in the misperception of exponential growth

Abstract

Previous studies have demonstrated that exponential growth functions are grossly underestimated by human subjects. The extent to which this underestimation depends on past experience was investigated in the present study, in which subjects were required to estimate future prices of a product based on a given rate of inflation. The subjects were drawn from two different populations (Canada and Israel) which had been exposed to radically different rates of inflation during the last few years. Underestimation of the growth function (i.e., the inflation rate) was observed for all subjects, but there was a significant (not just in the statistical sense) difference between subjects, depending on the population from which they were drawn. The magnitude of underestimation for Israeli subjects was significantly smaller, a result that was confirmed in an additional experiment (after the change in the Israeli monetary unit). The results are discussed within the framework of subjective scales of numbers.

Reference Notes

  1. 1. Hogarth, R. M.Functional and dysfunctional aspects of judgmental heuristics: A dynamic perspective (technical report). Chicago: University of Chicago, Center for Decision Research, Graduate School of Business, 1979.

References

  1. Banks, W. P., &Coleman, M. J. Two subjective scales of number.Perception & Psychophysics, 1981,19, 95–105.

    Google Scholar 

  2. Banks, W. P., &Hill, D. K. The apparent magnitude of number scaled by random production.Journal of Experimental Psychology, 1974,101, 353–376.

    Article  Google Scholar 

  3. Caramazza, A., Mcloskey, M., &Green, B. Naive beliefs in “sophisticated” subjects: Misconceptions about trajectories of objects.Cognition, 1981,9, 117–123.

    Article  PubMed  Google Scholar 

  4. Luce, R. D. What sort of measurement is psychophysical measurement?American Psychologist, 1972,17, 96–106.

    Article  Google Scholar 

  5. Timmers, H., &Wagenaar, W. A. Inverse statistics and mis-perception of exponential growth.Perception & Psychophysics, 1977,11, 558–562.

    Article  Google Scholar 

  6. Tversky, A., &Kahneman, D. Judgment under uncertainty: Heuristics and biases.Science, 1974,185, 1124–1131.

    Article  PubMed  Google Scholar 

  7. Wagenaar, W. A., &Sagaria, S. Misperception of exponential growth.Perception & Psychophysics, 1975,18, 416–422.

    Article  Google Scholar 

  8. Wagenaar, W. A., &Timmers, H. Extrapolation of exponential time series is not enhanced by having more data points.Perception & Psychophysics, 1978,14, 182–184.

    Article  Google Scholar 

  9. Wagenaar, W. A., &Timmers, H. The pond-and-duckweed problem: Three experiments on the misperception of exponential growth.Acta Psychologica, 1979,43, 239–251.

    Article  Google Scholar 

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Gideon Keren.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Keren, G. Cultural differences in the misperception of exponential growth. Perception & Psychophysics 34, 289–293 (1983). https://doi.org/10.3758/BF03202958

Download citation

Keywords

  • Exponential Growth
  • Inflation Rate
  • Subjective Scale
  • Ecological Validity
  • Future Price