Credit Risk Rating and Noise

Behavioral economics long been an important area of study as to how people make judgmental decisions. The latest contribution to this field comes from the Nobel Prizewinning Daniel Kahneman and his co-authors in Noise: A Flaw in Human Judgment.¹ They examine the degree to which judgments in areas as diverse as medicine, law, economic forecasting, police behavior, food safety, bail, security checks at airports, strategy, and performance evaluati…