I am trying to politely tell you that you have a lot to learn about signaling. Suits and smiles do credibly signal things. And the larger point is that the ability of a signal to work usually has little to do with how long it has been around or who knows that it is a signal.

The post here was specifically talking about status-indicating signals. What a business suit actually signals is more like acceptance of certain social norms about what "serious business" entails. Most clothing is more about ingroup identity than status, per se. To the extent that a suit is expensive, and other people notice this, it will also signal status via wealth, of course, but that's somewhat orthogonal.

Also, smiles are probably hard-wired and are actually difficult to fake.

Many signals are quite long lived, and can survive even when people are well and consciously aware of them. Wearing a business suit signals you are serious about business, for example, and a smile signals friendliness.

Politics or not, I find this to be a great illustration of the real-world consequences of failure of rationality. The interesting question is at what point the mechanism breaks down.

he logical course of action for rich countries is to study the most effective methods of poverty alleviation and development, and apply those. We can see clearly that this is not happening, but it's unclear as to why:

-Are rich countries wrong about the conditions they're facing, and thus using improper methods? If so, is there a bias that causes them to misperceive conditions? -Have rich countries erroneously identified ineffective methods of aid as effective? If so, is there a bias that causes them to wrongly pick the wrong methods? -Do rich countries actually want to harm poor countries and keep them down, under the guise of aid? If so, why is this scheme able to go on for so long? -Are, as EY implies, rich countries more interested in buying their own moral satisfaction? If so, why do people get moral satisfaction from appearances of morality instead of actual morality - wouldn't it be better if we derived pleasure from actually helping others?

There's probably more points at which the mechanism can fail. In any case, I think this is a great example of horrible consequences of failures of rationality: an entire continent's development may be slowed down, and countless lives shortened or destroyed. Perhaps issues like these are good for the purposes of discussion of practical applications of rationality - we probably won't be able to make everyone in power in rich countries a rationalist. How do we get them to act rationally?

"how often do you beat your wife?"

I never beat my wife. The notorious question you're looking for is, "when did you stop beating your wife?"

part 2: "So what an expert rationalist should do to avoid this overconfidence trap?"

Apologies for flooding the comments, but I wanted to separate the ideas so they can be discussed separately. The question is how to avoid overconfidence, and bias in general. Picking up from last time:

If we can identify a bias, presumably we can also identify the optimal outcome that would happen in the absence of such bias. If we can do that, can't we also constrain ourselves in such a way that we can achieve the optimal outcome despite giving in to the bias? For example, David Balan referenced his own softball game, in which he swings a half-second to early and has been unable to tell himself "swing .5 seconds later" with any success. My advice to him was to change his batting stance such that the biased swing still produces the optimal outcome.

This idea of "changing your stance" is especially useful in situations in which you can't constrain yourself in other ways: in situations in which you know you will be biased and can't avoid making decisions in such situations. David would have to avoid the game altogether to correct his bias, but that's akin to saying that the dead don't commit bias: by adjusting his stance he can stay in the game AND have the right outcome.

In contrast to constraining your possible set of actions to unbiased ones [as I suggested in my other comment] the other possible way to deal with it is to set your starting point [your "stance"] such that the biased action/decision gets you to the right place.

"So what an expert rationalist should do to avoid this overconfidence trap?"

You mean, how should one overcome bias? Be less wrong, if you will? You've come to the right place. David Balan had a post that didn't receive enough attention over at OB: http://www.overcomingbias.com/2008/09/correcting-bias.html This comment roughly paraphrases the points I made there.

If we can identify a bias, presumably we can also identify the optimal outcome that would happen in the absence of such bias. There are two ways to achieve this, and I will post them in separate comments so they can be voted down separately.

If you can identify an optimal outcome for a situation in which you are likely to be biased, you can constrain yourself ahead of time such that you can't give in to the bias. The classical example is Odysseus tying himself to the mast to avoid giving in to the sirens' song. Tie yourself to the mast at a rational moment, so you don't err in a biased one.

Applying this to your example, if you are indeed trying to maximize returns on a portfolio, the last place you should make buy/sell decisions is on a loud, testosterone-laden trading floor. It's better to decide ahead of time on a model based on which one is going to manage: "If a tech stock has x earnings but y insider ownership, then buy." Stick to your rules [perhaps bind yourself through some automatic limit that you cannot circumvent] as long as they seem to be tending to achieve your goal [maximize return]. Revisit them if they don't seem to - but again, revisit them at a time you are not likely to be biased.

"So what an expert rationalist should do to avoid this overconfidence trap? The seeming answer is that we should rely less on our own reasoning and more on the “wisdom of the crowds."

As Bryan Caplan's "Myth of the Rational Voter" pretty convincingly shows, the wisdom of crowds is of little use when the costs of irrationality are low. It's true in democracy: voting for an irrational policy like tariffs has almost no cost, because a single vote almost never matters. The benefit of feeling good about voting for what you like to believe in is big, though.

Similarly, in religious matters, the costs to the individual are usually slight compared to the benefits: the cost of, say, weekly attendance of a church provides group bonding and social connections. [There are certainly places, and there were times, when costs were vastly higher - daily attendance, alms tax, etc. But the benefits were proportionately bigger, as your group would be key to defending your life.]

In either case, trusting the wisdom of crowds seems to be a dangerous idea: if the crowd is systematically biased, you're screwed.

Agency misfires and causal misfires can help to suggest religion. For that suggestion to get past your filters, the sanity waterline has to be low. I don't invent a new religion every time I see a face in the clouds or three dandelions lined up in a row.

I already mentioned this as a comment to another post, but it's worth repeating here: The human brain has evolved some "dedicated hardware" for accelerating certain tasks.

I already mentioned in that other post that one such hardware was for recognizing faces, and that false-positives generated by this hardware caused us have a feeling of hauntedness and ghosts (because the brain receives a subconscious signal indicating the presence of a face, but consciously looking around we see no one around).

Another such hardware (which I only briefly alluded to in the other post) was "agency detection". I.e. trying to figure out whether a certain event occurred "naturally", or because another agent (a friend, a foe, or a neutral?) caused it to happen. False positives from this hardware would cause us to "detect agency" where none was, and if the event seems something way out of the capacity for a human to control, and since humans seem to be the most powerful "natural" beings in the universe, the agent in question must be something supernatural, like God.

I don't have all the details worked out, but it seems plausible that agency-detection could have been naturally selected for, perhaps to be able to integrate better into a society, and to help with knowing when it is appropriate to cooperate and when it is appropriate to defect. It's a useful skill to be able to differentiate between "something good happened to me, because this person wanted something good to happen to me and made it happen. They cooperated (successfully). I should become their friend." versus "something good happened to me, despite this person wanting something bad to happen to me, but it backfired on them. They defected (unsuccessfully). I should be wary of them."

From there, bring in Anna Salamon and Steve Rayhawkideas about tag-along selection, and it seems like religion really may be a tag-along evolutionary attribute.

Anyway, I used to be scared of ghosts and the dark and stuff like that, but once I found out about the face-recognition hardware and its false positives (and other hardware, such as sound-location) this fear has almost completely disappeared almost instantaneously.

I was already atheist or agnostic (depending on what definitions you assign to those words) when I found out about the hardware false-positives, so I can't say for sure whether had I been religious, this would have converted me.

But if it worked at making me stop "believing"[1] in ghosts, then perhaps it could work at making people stop beliving in God as well.

1: Here I am using the term "believe" in the sense of Yvain's post on haunted rationalists. Like everyone else, I would assert that ghosts didn't really exist, and would be willing to make a wager that they didn't exist. And yet, like everyone else, I was still scared of them.