Wednesday, June 8, 2016

Spotting Trends or Predicting the Future?

The social sciences today are built around collecting data. Polls seem very important. Opinions are gathered and regressions are performed and truth is finally synthesized. Except, there is a problem with social experiments: namely, they have proven quite difficult to replicate.

Much of what is being done in the social sciences today is what Steve Sailer aptly points out is marketing research. The reason that social experiments can't be repeated is because they have only spotted a particular trend, not identified a truth about mankind. This is a problem on several fronts, for instance: 1) predictable human behavior is often used to justify state force in the marketplace and 2) the people most interested in justifying state force are in position to fund or subsidize research.

Spotting trends is important for marketing campaigns aimed at reminding people to buy products or to convince new people to buy products. As a justification for state force: well... just imagine cigarette commercials from the early 20th century as being metaphors for political policies today.

Should policies be based on trends? In the early 2000s, housing prices maintained the same trajectory that they had been trending for decades. Understanding that this trend reflected a general truth about housing, policies were put in place to open access to mortgages for people who otherwise could not achieve the American Dream. Under the ostensible impetus of increasing drug crime, policies emerged to combat this rising trend. The housing policies turned out to be an incredible boon for people with variable rate mortgages and the economy in general; and, the drug crime of the late 80s has virtually been eradicated. And smoking Lucky Brand cigarettes builds vigor.

Predicting the future, on the other hand, tends to be a bit of a ball-and-cup game. Some people continue to make the same predictions, only to be proven right like a broken clock: the doom-and-gloom forecasters, the benevolent bureaucrats, the commodity analysts. These people have a consistent message and when they are right, you're wrong; and when they're wrong, it was a timing issue.

Science fiction has a had a pretty good track record of predicting technologies, institutions and cultural turns. Jules Verne foresaw the submarine and the scuba tank; Arthur C. Clarke predicted the sling shot maneuver; Phillip Dick presaged the pre-crime of DUI checkpoints and the various other guilty until proven innocent show trials of the modern day.

On another spectrum entirely are economists: part seers, part scientists. Cantillon described the process by which devalued money drives overvalued money under the mattress. This allows us to make fairly accurate predictions given a particular circumstance that it describes. Same thing with supply and demand curves. Perhaps the most famous (least talked about) prediction is that of von Mises logical assessment of the decline of the Soviet Union. While other prominent economists praised the foresight of a command economy, Mises explained that the lack of market feedback in terms of pricing would inevitably crush the Soviet Union. But that took 70 years.

Can we really say that people have had any success predicting the future? And if they haven't, how should our institutions reflect this general truth? Mises was right about the Soviet Union specifically; but his general ideas are rarely given proper, much less short, shrift. Complex economies require freedom of action to establish prices; prices bake a pretty complex cake with ingredients about past behaviors, present behaviors and possible future ones. Hayek called this process decentralized knowledge. Under this viewpoint, the future is unknown and ideas compete to allocate resources to satisfy future wants. The ideas of Mises and Hayek predict a general rise in living standards concomitant with freedom of prices, which appear to correspond to societies operating under those policies. Am I hedging or is that about as close a description of a natural phenomena that we can get?


  1. I was going to make a comment about Chaos Theory, but it's still early-ish and I've only had one cup of coffee. I'll touch on it a little.

    Instead, I'll talk about predicting the future based on the current - and expecting the same results from manipulation.

    Obama and Sacramento tried this in early 2009, targeting cigarettes. They, especially Sacramento, had revenue projections on what could be, if only they raised the sales tax. Of course, they too insist the aim was to get people to stop smoking. They didn't get what they expected. Instead, the market responded.

    1) Cheaper alternatives. Mail order cigarettes became all the rage. Tax free (and sometimes of inferior quality), these alternatives ran about 25 to 30 percent cheaper. The practice of mail order tobacco ended up getting banned. Even still, more affordable tobacco seems to move faster than the costlier name brands.

    2) eCigarettes grew in popularity, now it's a major participant in the industry.

    3) Or, people just bought less of what they already liked.

    Predicting and manipulating human behavior is harder than herding cats. I'd wager to say this is why trend analysis and forecasting bears such a heavy cost and why it has a high value associated to it.

    It's assumed humans can be domesticated into predictable norms like a dog or a cow. Humans adapt to circumstances to achieve their ends - whether we talk about how we're going to get cigarettes, food, or shelter. This is how humans have survived for thousands of years, in a wide variety of environments and conditions. If humans lost this trait, we wouldn't be talking about humans anymore.

    This is why central planning doesn't seem to achieve the desired results long term.

    1. In the future, I would love to hear whatever it is you have to say on Chaos Theory.

      In the meantime, I have responded to your comment with a post that has been knocking around in my skull since I watched the most recent John Oliver the other night.

      On a related note, I understand that public rail is known for being wildly optimistic in estimates for potential passengers. The estimates are required to push through an expensive project that will make some bureaucrat or two look effective.

      California just finished a rail from downtown LA to the beach in Santa Monica, and I'm not holding my breath about its viability. Other people's money, not subject to profit or loss is an arbitrary application of force in the marketplace. Ipso facto throwing darts in the dark at a board that may not even be in the same zip code.

    2. I'll read your newest post tonight.

      As far as what I have to say on Chaos Theory, it's a laymens understanding.

      I commented on BM's blog about my experience in Crony industries. In my experience the "Best possible number" is thrown out to gain public support and/or justification for funds spent. For things like Rail, Wind Farms, or Toll Roads there's usually a Private Partnership, where a private entity pays a share of the cost. In return, they collect X% of the revenue for X amount of time. (The percentage is usually the Lion's Share, the amount of time is usually across a decade at least)

      The Unions get on board because the workers love the wages, more so if it's a prevailing wage contract. The bosses love the union dues.

      It's a boondoggle and the participants know it to some extent. This may not be the case all the time, but I've rarely seen it otherwise.