Following the ground-breaking work of Ellen Langer in 1975, we have come to understand the illusion of control as a cognitive bias that manifests as the perception that we have more control over some events than we actually do. One of my favourite examples of this bias looked at gamblers trying to throw the combined dice value they needed in a game of pure chance. When a person needed a high number they threw the dice harder; and softer when they needed a lower value. Other studies have shown individuals to believe they could improve their ability to predict a coin toss with practice (44% of participants believed this).
Like all cognitive biases this phenomenon must have served a functional advantage and one could speculate for hours as to the benefit here – of which many suggestions may be correct. Perhaps the still-evolving human, living in an unforgiving, survival-of-the-fittest world, who believed that they could control events that were beyond their influence; would persevere longer. Maybe these organisms chanced their way through danger they couldn’t control but would assert themselves at the very first instant they could because they had never believed that they couldn’t make a difference. Conversely, however, in situations where we have a lot of control we have been shown to underestimate it; perhaps suggesting that theories attributing responsibility to heuristics in the mechanisms by which we link goals to outcomes are correct. The bias has been shown to strengthen in stressful and competitive situations, which should be taken into account in its interpretation (the implications to financial markets I’m sure speak out on their own).