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Know Thyself: Competence and Self-awareness

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  • Paul Ferraro

Abstract

Economic analysis of asymmetric information typically starts with the assumption that individuals know more about their own characteristics than outside observers. This assumption implies that individuals can accurately assess their own competence in a given domain. However, individuals can only judge their competence if they are sufficiently competent. Results from field experiments contradict predictions from economic theories that assume self-aware agents, but are consistent with predictions from theories that incorporate a positive correlation between competence and self-awareness in a given domain. This correlation explains some of the overconfidence observed among economic agents and implies a structure on decision errors that can be exploited to make novel predictions in important areas of economics. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Paul Ferraro, 2010. "Know Thyself: Competence and Self-awareness," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(2), pages 183-196, June.
    • Handle: RePEc:kap:atlecj:v:38:y:2010:i:2:p:183-196
    DOI: 10.1007/s11293-010-9226-2
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    References listed on IDEAS

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    1. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
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    Citations

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    Cited by:

    1. Grabiszewski, Konrad & Horenstein, Alex, 2020. "Effort is not a monotonic function of skills: Results from a global mobile experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 176(C), pages 634-652.
    2. Ryvkin, Dmitry & Krajč, Marian & Ortmann, Andreas, 2012. "Are the unskilled doomed to remain unaware?," Journal of Economic Psychology, Elsevier, vol. 33(5), pages 1012-1031.
    3. Brookins, Philip & Lucas, Adriana & Ryvkin, Dmitry, 2014. "Reducing within-group overconfidence through group identity and between-group confidence judgments," Journal of Economic Psychology, Elsevier, vol. 44(C), pages 1-12.
    4. Estefanya Charlotte Vazquez-Casaubon & Veroline Cauberghe & Dieneke Van de Sompel, 2024. "“I conserve more water than others, do I?" An exploratory study examining self-assessment misperceptions of water conservation," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(3), pages 7303-7317, March.
    5. Schlösser, Thomas & Dunning, David & Johnson, Kerri L. & Kruger, Justin, 2013. "How unaware are the unskilled? Empirical tests of the “signal extraction” counterexplanation for the Dunning–Kruger effect in self-evaluation of performance," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 85-100.
    6. Ma, Zhao & Bauchet, Jonathan & Steele, Diana & Godoy, Ricardo & Radel, Claudia & Zanotti, Laura, 2017. "Comparison of Direct Transfers for Human Capital Development and Environmental Conservation," World Development, Elsevier, vol. 99(C), pages 498-517.
    7. Guest, Jon & Riegler, Robert, 2017. "Learning by doing: Do economics students self-evaluation skills improve?," International Review of Economics Education, Elsevier, vol. 24(C), pages 50-64.
    8. Guanlin Gao & Danyang Li, 2022. "Knowledge, overconfidence, and behavior in COVID-19: results from an online survey," Economics Bulletin, AccessEcon, vol. 42(1), pages 215-223.
    9. Matteo Foschi, 2016. "Contracting with Type-Dependent Naïveté," Discussion Papers in Economics 16/03, Division of Economics, School of Business, University of Leicester.

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    Keywords

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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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