I'm trying to better understand the relationship between incentivization and rationality, and it occurred to me that it is a "folk fact" around here that large financial incentives don't make cognitive biases go away.
However, I can't seem to find any papers that actually say this. It's not easy to google for (I have tried) so I wonder if the Less Wrong collective memory knows how to find the papers?
Is there a pattern to which biases go away with incentivization? Do we have at least 5 examples of biases that go away with incentivization and 5 examples that don't go away with incentivization?
As an incentive, I'll paypal $10 to the commenter whose answer is least biased and most useful.
Well, if someone knows about systematic biases that don't go away with incentivization, they're probably too busy making money off that insight to comment here!
In practice, when the stakes are high, it is not so much that people start thinking more accurately -- though this will happen to some extent, and for some people dramatically so -- but rather that they become more cautious.
If you take ordinary folks into the lab and ask them questions they don't care about, it's easy to get them to commit all sorts of logical errors. However, if you approach them with a serious deal where some bias identified in the lab would lead them to accept unfavorable terms with real consequences, they won't trust their unreliable judgments, and instead they'll ask for third-party advice and see what the normal and usual way to handle such a situation is. If no such guidance is available, they'll fall back on the status quo heuristic. People hate to admit their intellectual limitations explicitly, but they're good at recognizing them instinctively before they get themselves into trouble by relying on their faulty reasoning too much.
This is why for all the systematic biases discussed here, it's extremely hard to actually exploit these biases in practice to make money. It also explains how market bubbles and Ponzi schemes can lead to such awful collective insanity: as the snowball keeps rolling and growing, people see others massively falling for the scam, and conclude that it must be a safe and sound option if all these other normal and respectable folks are doing it. The caution/normality/status quo heuristics break down in this situation.
So this actually contradicts the paper that Eliezer cited, or at least seems to, yet it seems to ring true. Not only does the hypothesis that incentive reduces bias seem convincing to you and I, but it also forms a whole Chapter of Caplan's book "The Myth of the Rational Voter".
I think I'm going to split the prize between this comment and Eliezer Yudkowsky's one. Feel free to PM me and claim your prize.