Often Wrong, But Never in Doubt

http://www.nytimes.com/2010/08/22/business/economy/22view.html?_r=1&scp=1&sq=overconfidence&st=cse

by timr • 16 years ago

16 16 16 years ago

lzw5• 16 years ago

The problem is very simple: What passes for "Economics" is political propaganda. The government wants to spend without limit and wants to believe the economy is "strong" and that they made it "strong", so they call for forecasts that the economy is recovering and they call for economic policies that justify government spending.

Obama actually said "Some critics have said my Stimulus package is just a bunch of spending, but what do you think Stimulus IS?". Equating government spending (which does damage to the economy) with "stimulus".

So long as your doctors are giving the patient poison, and telling you that health is just around the corner, of course they're going to be wrong and you're going to be confused.

Economic is really straightforward. It is just that economic reality is not convenient for politicians.

Less spending, less regulation, and preferably go back to a gold standard or somehow structurally stop inflation.... and the economy will eventually start to get better.

What we have now is a near dead patient whose being injected with ever larger doses of amphetamines to keep him moving and "in recovery". Eventually it will kill him.

markstansbury• 16 years ago

Stimulus spending is nonsense and political poison?

So Honda shouldn't borrow money to build a new plant but should save up until they can pay cash? Borrowing now to build productivity and cash flow later is a delicate move on such a large scale, to be sure, but that's a far cry from it being bunk science.

p.s. the gold standard didn't work.

lzw5• 16 years ago

The government never pays back the borrowed money, it just prints money. When it does this it dilutes the total number of dollars out there, which is called inflation. This means that every business then has to spend more to buy the goods and services they need and pay their employees more. Thus, even if the stimulus were perfectly spent, the cost of the stimulus does more damage to the economy than the stimulus could try to fix.

To compare it to a a business taking out a loan is nonsensical. Businesses repay loans, and those loans are backed by assets (such as the business or the plant being built)

You represent exactly the problem I'm talking about. You know nothing about economics and you can't even make an economic argument (re: your assertion about the gold standard) yet you are totally convinced that I said something wrong. You have been taught to believe junk science and not only to believe it, but to believe that anyone who speaks differently is somehow wrong and not worth arguing with. This is ideological conditioning, and politicians use it effectively to be able to put one over on you, and others like you. Since much of the population was educated in government run schools to engage in non-think this way, I will never convince you.

And that is why this countries economy is going to continue to crater, until we have a major political upheaval.

andylei• 16 years ago

did you even read the article?

this article is about CFO's inability to estimate their own forecasting abilities. your comment is totally irrelevant.

lzw5• 16 years ago

Actually it is relevant because it is the rejection of the science if economics that kids to the inability to forecast. The housing bubble, for instance was easy to see coming....if you understand economics.

byoung24• 16 years ago

I stopped reading when I got the moon question pretty much dead on.

byoung24• 16 years ago

Thanks for downvoting...here's more info:

When we say we are sure about a certain fact, for example, we may well be right only half the time.

To see how it works, try this little quiz: Give two estimates of the diameter of the moon in miles -- a high and a low one, so that there is about a 10 percent chance that the moon is bigger than the upper estimate and a 10 percent chance that it is smaller than the lower one.

I know that the circumference of the Earth is about 25000 miles, and I know that circumference is pi * diameter, which makes the diameter of Earth about 8000 miles. I also know that the moon is about 1/4th the size of Earth, so I guessed 2000-2500 miles for its diameter.

The correct answer is 2160, so I didn't see the merit in continuing to read an article about how people get overconfident when forecasting.

nevernormal1• 16 years ago

Interesting. One could have concluded that it was a bad example, but you concluded you have no overconfidence problem.

abecedarius2• 16 years ago

Heh. I also calculated it from facts I knew, and got it wrong, even accounting for approximations and uncertainties. The facts I happened to know made for a trickier calculation. (The moon makes one pretty-circular orbit per month following Newton's laws; it subtends 1 degree in the sky. But actually it subtends 1/2 degree -- I haven't checked if this was my only error, but gosh, it sure is easy to goof.)

abecedarius2• 16 years ago

http://roughly.beasts.org/ gives you another chance to check your calibration. Answer 30 questions from random general knowledge, estimating both the answer and your range of uncertainty. However, it gives you one score which is some kind of combination of your accuracy of estimation and of calibration; you'll have to separate those factors yourself from the full results.

Often Wrong, But Never in Doubt

Related Stories