Fascinating discussion over at Edge about the nature of expert judgment and what it means. (It careens into a little HedgeHog and Fox arguments).  This has an enormous relevancy for investors.

Here’s the intro, plus a link to the video.

How to Win at Forecasting

There’s a question that I’ve been asking myself for nearly three decades now and trying to get a research handle on, and that is why is the quality of public debate so low and why is it that the quality often seems to deteriorate the more important the stakes get?

About 30 years ago I started my work on expert political judgment. It was the height of the Cold War. There was a ferocious debate about how to deal with the Soviet Union. There was a liberal view; there was a conservative view. Each position led to certain predictions about how the Soviets would be likely to react to various policy initiatives.

One thing that became very clear, especially after Gorbachev came to power and confounded the predictions of both liberals and conservatives, was that even though nobody predicted the direction that Gorbachev was taking the Soviet Union, virtually everybody after the fact had a compelling explanation for it. We seemed to be working in what one psychologist called an “outcome irrelevant learning situation.” People drew whatever lessons they wanted from history.

There is quite a bit of skepticism about political punditry, but there’s also a huge appetite for it. I was struck 30 years ago and I’m struck now by how little interest there is in holding political pundits who wield great influence accountable for predictions they make on important matters of public policy.

Click to view video

Source: Edge

 

Click to read full article

 

 

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Philip E. Tetlock is Annenberg University Professor at the University of Pennsylvania (School of Arts and Sciences and Wharton School). He is author of Expert Political Judgment: How Good Is It? How Can We Know? Which describes a twenty-year study in which 284 experts in many fields, including government officials, professors, and journalists and ranging from Marxists to free-marketeers, were asked to make 28,000 predictions about the future. He found they were  only slightly more accurate than chance, and worse than simple extrapolation algorithms. The book has received many awards, including the 2006 Woodrow Wilson Award from the American Political Science Association and  the 2008 Grawemeyer Award for Ideas Improving World Order.

Category: Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “How to Win at Forecasting”

  1. S Brennan says:

    I Think it’s pretty hard predict the future when you’ve been immersed in a sea of propaganda and have an inaccurate history…or what the lessens of the past hold.

    To the Republicans vs Nate Silver:

    “How do people react when they’re actually confronted with error? You get a huge range of reactions…Generally, people don’t like to rethink really basic assumptions. They prefer to say, “Well, I was wrong about [X].” They prefer to tinker with the margins of their belief system…A surprising fraction of people are reluctant to acknowledge there was anything wrong with what they were saying. ”

    I would add that Obama supporters have the same problem distinguishing the Obama Hope Machine of 2008 and his seamless continuation [if not accentuation] of George Bush’s [the 2nd] policies.

    For the record every hard core Obama supporter was predicting a very close race, while I was telling them to pull their panties out of their crack…it’s Obama in a clean sweep. My reasoning was incredibly simple, extremist right wingers had painted Romney into an ideological corner during the primaries in an attempt to bolster their careers as prime time pundits. This left Obama’s right wing policies unexamined by voters.

    Punditry pays well if you can get over the threshold…and most “candidates” are there to try to snag these jobs, they ARE NOT really there for any other reason than personal advancement.

    My record on Prez races has missed twice, once in 2000 and again in 2004, I even called it for Carter before the primaries began in earnest. And yeah, like the author says, I still fall victim to my own prejudices, think their was hanky panky in both 2000-2004…and so it goes.

  2. with..”…I’m struck now by how little interest there is in holding political pundits who wield great influence accountable for predictions they make on important matters of public policy…”

    is the Speaker, of that Line, ‘saying it with a Straight Face’ ?

    if so, here are a few ‘Breadcrumbs’ for him/her..

    http://search.yippy.com/search?query=1950s+21+rigging+of+Gameshows&tb=sitesearch-all&v%3Aproject=clusty

    http://moralphilosophyofcurrentevents.blogspot.com/2011/03/operation-mockingbird-revisited-elite.html

    “…”You could get a journalist cheaper than a good call girl, for a couple hundred dollars a month.”

    CIA operative discussing with Philip Graham, editor Washington Post, on the availability and prices of journalists willing to peddle CIA propaganda and cover stories. “Katherine The Great,” by Deborah Davis (New York: Sheridan Square Press, 1991)

    http://www.google.com/search?q=+%22Katherine+The+Great%2C%22+by+Deborah+Davis+&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a#q=%22Katherine%20The%20Great%2C%22%20by%20Deborah%20Davis&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&hl=en&tbo=u&tbm=bks&source=og&sa=N&tab=wp&psj=1&ei=qbzDUKSZK-TD0AGikYC4DQ&bav=on.2,or.r_gc.r_pw.r_qf.&fp=36ad7c0967172426&bpcl=39650382&biw=1024&bih=638

  3. S Brennan says:

    Mark E Hoffer,

    I agree with your link on the bombing campaign to overthrow Gaddafi. My disgust with the National Security Apparatus is unspeakable, it’s use of racist Al Qaeda thugs in Libya in combination with 24,000 bombing missions in 8 months [~100/day] to terrorize civilians and destroy infrastructure all to effect a step-in-fetch-it government is a despicable war crime.

    Gaddafi was not loved, but like Tito, he ran an effective government that kept out of debt and provided the highest standard of living in Africa. The overwhelming majority of Libyans opposed the the racists Al Qaeda thugs. Imagine if a foreign government intervened similarly in the occupy Wall Street protests…all support for the occupy movement would instantly evaporate. It baffles me that it never seems to occur to our rulers that our spooks/State Dept. create far more problems than ever they solve, perhaps it is because they are insulated to the results of their folly? Or Perhaps, they remeber what happens to Presidents who don’t provide Air Power to US sponsored take-overs of foreign governments?

    Pick your poison, but the unprovoked bombing of Libya was the most heinous act I have seen the US perform in my lifetime. Individual links have been blocked, but there is still plenty to see if you Google:

    racist Libya youtube

  4. RW says:

    The language of persuasion may appear similar to or even identical to the language of prediction but they are not the same act nor do they typically have the same purpose; e.g., prediction may value correctness but persuasion couldn’t care less, it only wants to move somebody.

  5. richartruddie says:

    Barry,

    As you see every day people make sense of why markets rise or fall based on implausible explanations in which they later deem to be plausible after the fact. If you look at everbodys end up year predictions for what the next year will bring in the market it’s amazing how far off everybody is.

    You are one of few people who will always be successful in the markets because you have built the right tools and mindsight to mitigate risk knowing that it is not possible to correctly predict every up and down in any markets whether it’s political climates changing or any other market of vast size.

  6. sellstop says:

    Great item. I like the part about healthcare. I spent a cold rainy day indoors on this quixotic task….

    http://ghickeyblog.blogspot.com/2012/12/the-cost-of-healthcare-in-us.html

    Not a mainstream idea so it will be shot down within a paragraph by most readers….

    “Things that bring transparency to judgment are dangerous to your status. You can make a case for this happening in medicine, for example. In so far as evidence based medicine protocols become increasingly influential, doctors are going to rely more and more on the algorithms–otherwise they’re not going to get their bills paid. If they’re not following the algorithms, it’s not going to be reimbursable. When the healthcare system started to approach 20 to 25 percent of the GDP, very powerful economic actors started pushing back and demanding accountability for medical judgment”

    and this,

    “. My inner sociologist says to me that when a good idea comes up against entrenched interests, the good idea typically fails. But this is going to be a hard thing to suppress.”

    Of course the bad ideas usually fail as well!

    gh

  7. HowardA says:

    The lack of crucial info in much of the public debate has spurred me in the last few years to identify info that explain what the real situation is. Here are some examples of areas I’ve looked into and what I’ve uncovered:

    I assembled data to show how the economy / prices have changed since I was born in 1952. It showed how much faster healthcare, college costs, real estate values, government expenditures have increased compared to average incomes and minimum wage. http://alturl.com/gcwh2 http://alturl.com/j5kkx

    Looked at what unemployment rate would be if labor participation rate had not dropped since 2000. The unemployment rate would be about 13. http://alturl.com/ptw8w

    Looked at what the election results would have been if ALL eligible voters had voted, based on a poll of UNLIKELY voters. Obama’s victory margin would have widened from 3.5% to 12.7%, the largest margin since Reagan/Mondale. http://alturl.com/8qjcc

    Looked at impact of tax rate changes since 1980. Prior to Reagan’s tax cuts the top 2% paid an average effective tax rate (taxes paid/AGI) of about 43%. Now they pay about 23%. The annual impact today is > $200 billion. The cumulative impact compounded at 5% since 1980 is about $7 trillion (>40% of total Federal debt; about 6 times the annual income of the top 2%) Do we need a wealth tax to pay off the federal debt? The total wealth of the top 2% is about $22 trillion. http://alturl.com/5xig5

    Looked at impact of population growth on economic performance since 1990. Growth has slowed, and the under 65 year old population will be flat thru the end of the decade. This will have a considerable stall effect on the economy and employment. http://alturl.com/yr57j

    Looked at how expenditures on education has changed since 1970. The k-12 enrollment is up about 8%. Meanwhile education employment is up 83% and education expenditures (adjusted for inflation) is up…..159%!!! (Makes a liberal take pause!) http://alturl.com/7bsmu

    If all these FACTS were the basis for public discussion, it may be easier to reach a consensus, and arrive at some effective solutions.

  8. Joop says:

    Very interesting thinking and argumentation. Very western democracy style. So, are the results universal or dependent of the system in wich they are found i.e what goes for the USA goes for China or Iran?

  9. Frilton Miedman says:

    “… I’m struck now by how little interest there is in holding political pundits who wield great influence accountable for predictions they make on important matters of public policy.”

    Vehement agreement.