Saturday, February 14, 2009

Blind faith

One of the most amusing - if that is the word - things to emerge from the current global anxiety is the persistence of those analysts, commentators and politicians who say things like:

"The recession will bottom out in October 2009 and we will start to see recovery in the housing market at the beginning of 2010."

Or: "Unemployment will rise by one million before it starts to fall.

" How, you ask yourself, having almost universally failed to call the most cataclysmic financial event of our lifetimes, do they suddenly know these things?

Have they no shame?

And why do they think we will believe them?

If there is one lesson that should arise from the humiliation of the financial system, it is a version of William Goldman's view of Hollywood: no one really knows anything.

It was blind faith that some people did know better than everyone else that got us into this position.

Successive prime ministers have been so in thrall to those who shout loudest - the CEOs, the City and Wall Street rainmakers - that they have not only allowed them to be effectively self-regulating but also self-rewarding.

John Major had been a PR for a bank before he became prime minister; Tony Blair became one - at £2.5m a year - after he left office

In times like these, everyone should have a book by their bedside to reach for at three in the morning.

If the Bible doesn't work for you, Philip Tetlock's nicely oxymoronic volume Expert Political Judgment might be an alternative.

Tetlock's book is based on two decades of research into 284 people who made their living "commenting or offering advice on political and economic trends".

He asked them simply to do what they apparently did best: predict what would happen in the world next in answer to specific questions.

Would oil prices rise or fall, would there be a boom or a bust, would we go to war?

And so on.

When the study concluded, in 2003, Tetlock's experts had made 82,361 forecasts and the results were correlated with the facts as they had turned out.

The experts were less accurate in their forecasts than a control group of chimpanzees choosing entirely randomly would have been.

Even specialists in particular narrow fields were not significantly more successful than reasonably informed laymen.

"We reach the point of diminishing marginal predictive returns for knowledge disconcertingly quickly," Tetlock suggested.

"In this age of academic hyperspecialisation, there is no reason for supposing that contributors to top journals - distinguished political scientists, area study specialists, economists and so on - are any better than attentive readers of the New York Times in 'reading' emerging situations."

Further, the more certain the forecaster was, the more likely his judgment would be awry, scientific proof that "the best lack all conviction, while the worst are full of a passionate intensity".

It is, I guess, worth bearing Tetlock in mind when we look ahead

When we are told that we need to keep shopping for things we don't need in order to save the things we have, for example.

Or when Robert Peston sing-songs the implications of the latest global apocalypse.

Or when attention cascades.

No one knows anything.

In some ways, it's a comforting thought.

After that, as the man almost said, we have nothing to be anxious about but anxiety itself.
The Guardian

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