Dunning-Kruger effect and Microprudential: Difference between pages

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''Behavioural economics''.
''Bank regulation''.  


The Dunning-Kruger effect is generally reported as an irrational tendency among certain incompetent individuals systematically to ''overestimate'' their true level of competence.
The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole.
 
In simple terms, this aspect of the Dunning-Kruger effect is the reverse of the [[Impostor syndrome]].
 
A possible explanation for the Dunning-Kruger effect is that the skills we need to assess our level of competence in a given task correctly, are exactly the same skills that we need to perform the task itself.  Those lacking in the task 'performance' skills would then, necessarily, lack the 'competence assessment' skills as well.
 
The Dunning-Kruger effect can however be 'cured', with even a relatively moderate amount of appropriate training.
 
 
Such tendencies to assess evidence incorrectly are known collectively as 'cognitive biases'. Affinity bias is another example.
 
 
The Dunning-Kruger effect is strictly defined more broadly, to ''include'' the Impostor syndrome (underconfidence of skilled people) as well as the effect described above (overconfidence of the unskilled).




== See also ==
== See also ==
* [[Affinity bias]]
* [[Capital adequacy]]
* [[Behavioural economics]]
* [[Macroprudential]]
* [[Cognitive bias]]
* [[Emotional intelligence]]
* [[Impostor syndrome]]
 
[[Category:Working_effectively_with_others]]
[[Category:Corporate_finance]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]

Revision as of 05:55, 27 March 2016

Bank regulation.

The part of the regulatory framework which is designed to enhance the safety and soundness of individual financial institutions, rather than the financial system as a whole.


See also