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Samantha HORN (University of Chicago ) “Inaccurate Beliefs about Skill Decay”

Abstract: Human capital investment decisions often rely on beliefs about how long skills are retained. We test the accuracy of these beliefs by asking participants to learn a new skill and predict their performance after a period of non-use. Participants substantially underestimate skill decay, with average errors ranging from 28% to 59% across tasks. Beliefs adjust after experiencing decay, suggesting that misprediction is specific to delayed performance. Miscalibrated beliefs predict lower demand for refresher training and appear partly motivated: participants are more accurate when forecasting others’ skill decay. Exploratory variable-importance analyses further suggest that participants underweight age, a strong predictor of performance decline. These findings point to systematic errors in forecasting skill retention.

Joint work : Daniel Connolly and George Loewenstein.