Posts filed under “UnGuru”
This morning, I get a tweeted at by a guy with over 100,000 twitter followers, but less than 10,000 Tweets.
Which coincidentally leads me to today’s WOTD from From wordspy:
n. An automated software program designed to mimic a real person on a social networking site. Also: social bot.
Now come socialbots. These automated charlatans are programmed to tweet and retweet. They have quirks, life histories and the gift of gab.
—Ian Urbina, “I Flirt and Tweet. Follow Me at #Socialbot.,” The New York Times, August 10, 2013
Now a group of freelance Web researchers has created more sophisticated Twitter bots, dubbed “socialbots,” that can not only fool people into thinking they are real people, but also serve as virtual social connectors, speeding up the natural rate of human-to-human communication.
—Mike Orcutt, “Twitter Bots Create Surprising New Social Connections,” Technology Review, January 23, 2012
See the full annotated definition at wordspy.
> My Sunday Washington Post Business Section column is out. This morning, we look at what good economists are to investors. The print version had the full headline What this investor took away from summer camp with the economists while the online version was 10 reasons why economics is an art, not a science. It…Read More
Whatever Happened to the Economic Policy Uncertainty Index? Mike Konczal Aug 6, 2013 Jim Tankersley has been doing the Lord’s work by following up on questionable arguments people have made about our current economic weakness being something other than a demand crisis. First, he asked Alberto Alesina about how all that expansionary austerity…Read More
Lately, I have been spending an inordinate amount of time with economists.
This past month, I have been at several dinners (party of 8) with them, spent time in the woods of Maine chatting them up, listened to their debates on economic policy, even spent time in a canoe fishing with them. Propriety — and Chatham House Rules — prevents me from naming any of the wonks, but it includes Chief Economists at major Wall Street firms, government entities, professors, with a few Nobel laureates thrown in for good measure.
This has led me to an interesting chain of thought about economists in general, and the failure of economics the discipline specifically. Note that I find economists to be intelligent, engaging and often charming. My references here are not to the people who call themselves economists, but rather to their work product that we call “economics.”
Long time readers know this is an an area of interest to me for many years (see the list after the jump). Way back in 2009, I gave 10 reasons Why Economists Missed the Crises. All 10 of the reasons given remain in force today, and may even be stronger.
In the intervening years, I have reached a few conclusions. This is worthy of much deeper study and analysis than the short shrift given here, but until then, I have a few ideas I wanted to jot down. If you have any intelligent thoughts on this subject, be sure to share them in comments.
Based on my time spent with Economists, here are a few anecdotal observations:
Issues of Economists & Economics
1. Economics is a discipline, not a Science. Physics can send a satellite to orbit Jupiter, Economics cannot tell you what happened yesterday. This is an enormous distinction, and has led to a) the “Physics Envy,” and b) an unnecessary emphasis on mathematical complexity.
2. Models are of limited utility. People forget that (as George Box has noted) models are imperfect depictions of reality. If you become overly reliant on them, you encounter a minefield of problems. Several analysts have told me that if the Fed cannot model something, than to them, it does not exist. Think about the absurdity of that viewpoint — and its impact on policy.
3. Contextualizing data often leads to error. This is more complex than it appears. What I mean by this is that everything that economists consider has to be forced into their intellectual framework; since everything is viewed through the imperfect lens of Economic Theory, the output is similarly imperfect — sometimes fatally.
4. Narrative drives most of economics. This is the corollary to the context issue. Everything seems to be part of a story, and how that story is told often leads to critical error. Think about phrases like “stall speed”, “second half rebound”, “muddle through”, “Minsky moment”, “austerity”, “escape velocity”, etc. All of these lead to rich tales often filled with emotional resonance.
5. Economists are loathe to admit ‘They Don’t Know.’ This trait is common to many professions, but I suspect the modeling issue may be partly to blame. Whenever I see forecast written out to 2 decimal places, I cannot help but wonder if there is a misunderstanding of the limitations of the data, and an illusion of precision. To paraphrase, “Only the people who understand both the data and its limitations will not get lost in the illusion of precision.”
6. A tendency to confuse correlation with causation. This is one of the oldest statistical foibles known to mankind, and yet economics remains rife with it at the highest levels. Look no further than the Fed’s obsession with the Wealth Effect for a classic correlation error; I shudder when I think about what other arenas they are fundamentally lost in.
7. The Peril of Predictions. I cannot figure out why economists seem to be so wed to making predictions, given how utterly miserable they are at it. Items 1 and 5 might be a factor.
8. Sturgeon’s Law: Lastly, there is a wide dispersion of talent in Economics, and following Sturgeon’s Law, many of the rank & file are simply mediocre.
One last note: This is not, as Paul Krugman has referenced, a debate as to which subgroup of economists are right or wrong; rather, its a set of observations of the species as a whole.
Perhaps this post is mis-titled; Instead of Blame the Economists it should read Blame Economics.
How one discredited “mortgage expert” from the American Enterprise Institute launched an ongoing disinformation campaign to destroy a successful government program that helped stabilize the mortgage markets. ~~~ Much of the brouhaha concerning the fate of the Federal Housing Administration can be traced to the actions of one dishonest man, a crackpot who is treated with utmost deference by…Read More
“They’re in the business of flattering the prejudices of their base audience and they’re in the business of entertaining their base audience and accuracy is a side constraint.” -Philip Tetlock While researching this week’s Washington Post column (Everybody loves a good story), I came across Professor Tetlock’s quote above (we have previously referenced Tetlock…Read More
More on Munis, Detroit, Bloomberg, Whitney & Wilson David R. Kotok Cumberland Advisors, July 24, 2013 In our recent commentary on municipal bonds and Detroit, we argued in favor of buying the highest-grade AAA tax-free municipal bond It currently yields more than the corresponding taxable US Treasury obligation. Meredith Whitney, Muni Cassandra emeritus…Read More
Last week, I noted my preference for Fed Chief was Anyone But Larry Summers. So you can imagine my disappointment when Ezra Klein posted this today: Right now, Larry Summers is the front-runner for Fed chair. Oy. This nation faces too very large political problems related to economics: 1. The President of the United States…Read More
Take The Zero-Hedge Test
Being permanently bearish on equities definitely pays.
Just ask Zero-Hedge. Unfortunately, for wool-dyed pessimists and the other overly-skeptical black sheep of the thundering herd, it pays apocalyptic newsletter writers’ paychecks, and Zero-Hedge/Tyler Durden’s Manhattan bar tabs rather than those who permanently position against market priapism. And it’s worse than zero-sum because those who are optimistically-challenged often pay for the bad advice – whether directly in subscriptions, inflated margins on retail bullion products, or indirectly via page-views and click-throughs AND then they get hosed by the market.
The first step to improving behaviour toxic to one’s own self interest is admit one has a problem. As an aid to help those who have difficulty in distinguishing “a bearish trade” from “the lead boots of anger and pessimism”, I’ve devised a little something I call the Zero-Hedge Test to determine more precisely whether readers objective realities are sufficiently paranoid, pessimistic, anti-social and rantingly angry to warrant more serious help.
Instructions: Circle the letter that best describes the adjacent image:
a. a glass of water
b. glass of water, half-empty
c. glass of water, half-full
d. glass of errrr ummm , Grey Goose vodka? (NB: ed. choice)
e. The US Government must have stolen half of a glass of water.
a. First black elected (and first to be re-elected) President of the USA
b. Barack Hussein Obama
c. A Former Senator from Illinois
d. tall guy who used to like to sneak a cigarette now & then
e. Jezebel, dark Sith Lord Vader Emperor & Chief of the Plunge Protection Team. Odious non-American african muslim responsible for taking away our world-beating healthcare, encouraging the immigrants and foreigners who took our our jobs, and formulating a secret plan to put two-dads in every home .
a. Something that still buys a 12oz can of Coca-Cola
b. A greenback, worth a dollar, which, on average, an American is paid each 4 minutes of work
c. A US Federal Reserve Banknote almost universally accepted in exchange for goods and services the world over
d. A cocaine hoovering apparatus c.1978
e. Worthless fiat toiletpaper, so useless that bric-a-brac, watches, baseball cards or bitcoin should be more preferred than this P.o.S. that forms part of the elders of Zion grand plan to steal your labour savings before eating your babies.
a. six would-be wedding bands
b. 1oz novelty of pure gold smelted by JM
c. Au = element #79 on Periodic Table
d. Reward for a 9.59 sec 100m
e. The solution to all our financial problems…changer of men from liberal faggot zionist atheist swine into god-fearing hardworking people of fortitude and rectitude…curer of cancer, balancer of budgets….purifier of all our precious bodily fluids and divinely-given laws….come, my preciousssss…