Posts filed under “Mathematics”
“We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” -Ned Davis
I began my career in finance on a trading desk. You learn some things very early on in that sort of situation. One of the most important things is that while it’s OK to be wrong, it can be fatal to stay wrong.
Unfortunately, that standard doesn’t apply to people whose work isn’t evaluated on a daily and objective basis via their profit and loss results. In many fields, such as politics and policy-making, there are lots of shades of gray when it comes to being right or wrong.
And quite bluntly, that is a shame. As a society and a nation, we would all be better off if the people who are consistently wrong paid some sort of price for those errors. Unfortunately, that doesn’t happen enough these days.
Some bad policy decisions will lead to the occasional elected official being turned out of office. That — unfortunately — is the exception, not the rule. I doubt history will rank George W. Bush and Barack Obama among our great presidents , but both were re-elected despite being unpopular. Between gerrymandered congressional districts and apathetic voters, even the most incompetent elected official has almost lifetime tenure.
What underlies all of this nonrecourse bad policy? It is much more than corporate lobbying and partisan politics. The worst of today’s political malfeasance is being driven by failed ideologies. Zombie ideas that refuse to die have become enshrined in our collective intellectual legacy. The people behind these have been insulated from the economic costs they impose.
Blame the billionaires.
They are ones who fund the think tanks. These think tanks in turn consider it their jobs to promote the ideology of their benefactors, regardless of its intrinsic value or demonstrable worth.
This theme keeps coming up again and again. About a year ago, I reminded people of a letter written to the Federal Reserve in 2010 warning that the central bank’s asset purchases risk “currency debasement and inflation,” none of which occurred. That meme propagated, leading to a series of articles across the blogosphere and mainstream media. Most recently, Bloomberg News tracked down the signatories to that letter, to see if they were willing to acknowledge that they were wrong. Not a one was willing to admit error. Perhaps the lack of contrition is best summed up by this New York magazine headline, “If Being Wrong About the Economy Is Wrong, I Don’t Wanna Be Right.”
These errors have a persistence that shouldn’t continue once the invalidity of the underlying belief system is demonstrated. But they continue on, as zombie ideas that refuse to die. Consider the following short list of disproven ideas, all based on concepts that originated from or were widely dispersed by think tanks or their benefactors:
Homo economicus (profit maximizing economic actors)
Austerity as a virtuous policy during recessions
The efficient-market hypothesis
Tax cuts pay for themselves (supply-side economics)
Some of the bad ideas that come out of the think-tank world eventually acknowledge that they are untrue by slowly morphing into a new shape.
Let’s consider a few of these bad ideas. The pushback against anthropogenic climate change, or man-made global warming, has gone through a three-step process: First, there were the simple denials: It doesn’t exist, temperatures aren’t rising, etc. The next step was: OK, climate change exists, but it’s a natural phenomenon, not man-made and is caused by sunspots or the end of the ice age from 10,000 years ago. The last phase is simply to say, regardless of the cause, it costs too much to do anything about anyway. Grist provides a thorough debunking of denialism in all its forms; if you want a more scholarly approach, try “The Oxford Handbook of Climate Change and Society.”
We saw a similar progression during the financial crisis, including many attempts to negate the role radical deregulation of financial markets had as an underlying cause of the crisis. American Enterprise Institute’s Peter Wallison and Edward Pinto were the leading proponents of the anything-but-deregulation causation. First, they blamed the Community Reinvestment Act — the anti-redlining legislation that had nothing to do with subprime lending. Next, it was the Department of Housing and Urban Development and the Federal Housing Administration. When that didn’t hold up they blamed Fannie Mae and Freddie Mac. When most of the subprime loans that went bust were shown to be from private lenders that didn’t follow Fannie or Freddie guidelines, they quietly changed the subject.
As we have noted before, there simply is no penalty for pundits who keep getting it wrong.
I am a fan of Morgan Housel, columnist at the Motley Fool. His writings evince a strong understanding of behavioral issues, and he has a gift of sifting through the nonsense to get to what really matters. Only on rare occasions do I get to disagree with him. Today is one of those times. Housel has…Read More
Last week, we discussed the problems with having poor reading comprehension and the impact that has on consuming news. This week, I want to look at the lack of math skills. America seems to becoming a dangerously innumerate society. Innumeracy is incompetence with numbers rather than words. This is a worrisome issue for the future…Read More
click for ginormous chart Source: FRED This morning’s column on Inflation truthers led to some emailers insisting inflation numbers are much higher post crisis than pre. Sorry, but the data says that is simply not true. Play with the attached FRED XL spread sheets all you want, the data is hard to argue…Read More
“All models are wrong; some are useful.” – George E. P. Box The quote above comes from George Box. He was a brilliant statistician and professor, who thought long and hard about the use and misuse of statistics. I was reminded of Box this weekend while watching the thrilling World Cup final between…Read More
Chances are that when you think about math—which, for most of us, happens pretty infrequently—you don’t think of it in anything like the way that Jordan Ellenberg does. Ellenberg is a rare scholar who is both a math professor (at the University of Wisconsin-Madison) and a novelist. And in his fascinating new book, How Not to Be Wrong: The Power of Mathematical Thinking, he deploys analyses of poetry, politics, and even religion in a bold recasting of what math is in the first place.
For Ellenberg, the stuff you hated about math in high school isn’t the core of the thing. He’s emphatic that mathematics isn’t simply about the calculations involving, you know, numbers; rather, it’s a highly nuanced approach to solving problems that we all, unavoidably, encounter. Ellenberg’s chapters range from showing how mathematical thinking undermines many popular proofs for the existence of God (Paley’s design argument, Pascal’s wager), to explaining how math helps us understand why smoking causes lung cancer (contrary to claims by one early statistician who actually argued that the causation might be reversed—that lung cancer might cause smoking!).
On the show this week we talked to Ellenberg about his book, and math: why you’re probably thinking about it all wrong, and why it’s so powerful.
This episode also features a short interview with Tasneem Raja, author of the must-read new article “We Can Code It: Why computer literacy is key to winning the 21st century” in Mother Jones, and a discussion of new findings about autism and possibly how to stop it—by making brain cells better able to communicate with one another.
From Betsey Stevenson & Justin Wolfers, a short primer on separating lies from statistics: 1. Focus on how robust a finding is, meaning that different ways of looking at the evidence point to the same conclusion. Do the same patterns repeat in many data sets, in different countries, industries or eras? 2. Results that…Read More