The Hindsight Bias and Its Applications

Abstract

The hindsight bias, also known as the “I knew it all along” effect, is a psychological phenomenon in which a person
believes they predicted the outcome of an event, even if they did not act on their “prediction.” Individuals can be
affected by the hindsight bias to confidently overestimate their judgment, which can have severe consequences. Also,
it can negatively affect all aspects of society to varying degrees. Social experiments have demonstrated that this
phenomenon exists in the investment industry, politics, and the law. It can be detrimental to individuals, affect the
outcome of political elections, and compromise the impartiality of police evaluations. Due to the impact of hindsight
bias, there are several suggested ways to prevent this bias, and it is essential to understand how to prevent and account
for it.