Economics Cognitive Biases Questions
The illusion of knowledge refers to the tendency of individuals to overestimate their understanding or expertise in a particular subject or field. In the context of economics, this cognitive bias can influence economic choices by leading individuals to make decisions based on incomplete or inaccurate information. People may believe they have a comprehensive understanding of economic concepts or market dynamics, leading them to make overconfident or misguided choices. This illusion of knowledge can result in poor investment decisions, inefficient resource allocation, and overall suboptimal economic outcomes.