Read this quotation from "Notes On Nationalism" by George Orwell
"It is curious to reflect that out of al the ‘experts’ of all the schools, there was not a single one who was able to foresee so likely an event as the Russo-German Pact of 1939... Political or military [or economic ?] commentators, like astrologers, can survive almost any mistake, because their more devoted followers do not look to them for an appraisal of the facts but for the stimulation of nationalistic loyalties. [Orwell here gives the following Nota Bene] (NB: ...Such errors as believing the Mrginot Line impregnable, or predicting that Russia would conquer Germany in three months, have failed to shake their reputation, because they were always saying what their own particular audience wanted to hear...)" (Italics mine.)
Now compare that observation with this from The New York Times Sunday magazine yesterday, which I got from an article on an economist named Nouriel Roubini.
"Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later. The dismal science, it seems, is an optimistic [albeit inaccurate] profession."
The Article was pretty good, but the commentator irritated me by spending too much time on the question of whether or not Roubini had an irrationally pessimistic personality. (A "perma-bear" as the 97% incompetent economic community put's it.) As far as I'm concerned this is time wasted in ad hominem tail chasing; time that might well be spent looking at the strengths and weaknesses of the guy's actual evidence and argument. Given that the guy predicted our current situation with stunning accuracy from two years out, it might be more worth my reading time to tell me about his observations and data rather than describing the worry lines on his face or the fact that his smile is something "closely resembling a grimace."
To quote Snoop Doggy Dog, "This type of shit happens all the time." The assumption here seems to be If the person in question doesn't look right to you, or is a little eccentric, perhaps, or was guilty of a sexual indiscretion (dear me, no!) or maybe did some non-prescribed drugs (quel horreur!) we are freed from the obligation to honestly determine whether or not what they have to say is correct, accurate and true or wrong, biased and silly.
Of further interest is the fact that Roubini is the student of the well known Jeffrey Sacks (I'm a little worried about Sacks' trust in globalism, so my jury is out on him at present. But I think he is no corporate schill and his book The End of Poverty presents a reasonable argument, but my support is not unconditional.) I remember the first time I saw Sacks interviewed. He was describing his work with the Bolivian government and he mentioned that part of what made his work there so controversial and ground breaking was that he took into account the fact that Bolivia is a land locked country and for this reason anything made or grown in the interior tended to be very expensive to transport. I was kind of astounded, "isn't that the sort of thing economists have always done?' I thought to myself.
Apparently not, because one of the criticisms of Roubini is that he is too "subjective." But as near as I can tell, in the obscure lingo of economists, "subjective" means anything that is derived from observing one's situation directly without the mediation of a mathematical calculation. As I read on it began to appear as if there is a deeply buried assumption among economists to the effect that mathematics itself contains the holy grail of objectivity and need be questioned no further. I'm not exaggerating for rhetorical effect here either, check out this from one of Roubini's critics cited in the article. (One wonders whether or not this guy is among the 3% of economists that occasionally get something right, but anyway...)
"All of Roubini's predictions, Banerji observed, have been based on analogies with past experience. This forecasting by analogy is a tempting thing to do, he said. But you have to pick the right analogy. The danger of this more subjective approach is that instead of letting the objective facts shape your views, you will choose the facts that confirm your existing views."
OK, so among the many questions that come up here is: Are there any facts that aren't objective? I hate to sound like a nit picker here, but language does start to lose its ability to convey meaning if we don't use words consistently, so I'm just going to take a second to clear this up.
A fact is by definition objective. I'm not really sure what a subjective fact would be. Subjectivity seems to me to be a way to refer to the fact that we don't all have the same set of facts (and mistaken opinions) to work with and that we might interpret our differing fact/mistake sets very differently. You can talk about objective and subjective "reality" or "experience" but not about "subjective facts." I'm pretty sure we decide to call things facts precisely because we want to refer to things we believe are objectively true for everyone, like gravity pulling us to earth and blue being blue and so on.
So the truth is objectivity and subjectivity have exactly nothing to do with this issue. The dispute is actually over what is the best way to interpret the facts we have. That is, Banejri worries that Roubini might be biased toward emphasizing the importance of some kinds of facts more than others, and that he might also use his chosen facts to build a comfortable illusion that fits in with what he already thinks is the case.
However, as always, the criteria for being correct is, well, being correct, not being objective. Being objective really helps up your batting average but you can be perfectly objective and still get things completely wrong. After all, what Roubini already thinks is the case might be pretty much dead on and continuing to find corroborating evidence might just be supplementing his already correct impression. Impugning someone's objectivity just hides your ad hominem attack under a pile of equivocations about objectivity and bias. Roubini and Banejri simply have two opinions and it is up to us to weigh them, pure and simple, their respective dispositions have nothing to do with it. In other words, I suppose we are all prone to, "choosing facts that confirm [one's] existing views," but what I don't understand is how Banerji's can be so sure he isn't doing the very same thing.
And this too, if something as obvious as taking geographic facts into account is a controversial approach or if looking for clues to solving our current problems by examining the past is not objective, then what is objectivity for an economist, exactly? I know that there are various measures: unemployment, inflation, trade deficits and so on and they seem to have some vague patterns and relationships, but hurricane Katrina hits, or OPEC wakes up with a bad hangover, or some terrorists make it on a plane or the Chinese Premier eats some bad shrimp, and all bets are off.
I suspect it is the authority of numbers that leads most economists astray. They try to use numbers in the same way physicists do, and what with the idiosyncrasies of human behavior being what they are it is no surprise that most of these calculations miss the mark. This is because humans are not as predictable as inanimate objects. Numbers for their own sake get us nothing, and if you proceed as if the truth is in the numbers and not in the stuff you apply the numbers to you might as well as well be looking at chicken entrails or tea leaves or tarot cards. In fact, you might actually be better off being honest about it and simply scrying by whatever method you prefer.
It seems at times that there is something atavistic in all this, and often economics looks more like magic than technology to me. I think a lot of people believe that if the numbers just right they will have perfect absolute objective knowledge, very much like the people who try to derive some secret something-or-other from studying the numerology of the old testament using the "science" of gematria. Do economists really have any clearer idea of what it is exactly they are trying to know? Maybe what sets economics apart from other sciences is that, for an economist, knowing as such is more or less impossible and the best anyone can hope for is predicting and/or controlling the large and mysterious forces where all our fears live. The more I think about it the more I think the economist has a lot in common with the sorcerer. All the most important characteristics, except maybe the pointy hat.
In any case, a strong belief in the power of numbers seems to me to be as much a bias as anything Roubini is proposing. What if there are economic factors that simply can't be measured/quantified? (like the depth of dishonesty and greed among corporate executives to name one) What then? I'm pretty sure dishonesty and greed does indeed influence the data set and if the findings don't account for that what good are the numbers? And if we (whoever that is) could know the specifics of the the dishonesty and greed of corporate executives accurately enough to measure it, why not save ourselves the math homework and simply forestall it? I don't know, maybe such things can and should be measured, I'm open to suggestions, but If such things cannot be measured then it seems to me that the math can be perfectly right, while the numbers are dangerously wrong.
And it seems as if Roubini may be onto this very problem.
"Many economists, Roubini among them, argue that some of the [unfounded] optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can't foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) These are things most economists barely understand, Roubini told me. We are in uncharted territory where standard economic theory isn't helpful."
Like Orwell pointed out, this isn't what Roubini's "particular audience" wants to hear so he's been dismissed for years. You know, I really do hate watching history prove him right. After all, this is not something one want's to be right about. Maybe that accounts for the grimace.
Anyway, it's 11:38 an I haven't even gotten started on the stuff I gotta do today, send out C.V.'s, clean up the camping gear, organize my notes, touch the puppet head, etc.
So, I'll leave you with this photo, which I took somewhere in Brighton. It seems to be in keeping with the theme of this entry.
I didn't think you needed special training...
"Apparently not, because one of the criticisms of Roubini is that he is too "subjective." But as near as I can tell, in the obscure lingo of economists, "subjective" means anything that is derived from observing one's situation directly without the mediation of a mathmatical calculation"
I really really liked this line, I think you summed it all up quite nicely.
Posted by: gina | August 18, 2008 at 06:33 PM
"Apparently not, because one of the criticisms of Roubini is that he is too "subjective." But as near as I can tell, in the obscure lingo of economists, "subjective" means anything that is derived from observing one's situation directly without the mediation of a mathmatical calculation"
I really really liked this line, I think you summed it all up quite nicely.
Posted by: gina | August 18, 2008 at 06:36 PM