The recent hoopla surrounding Brexit has shined a dusty mote through the Overton Window. The media narrative surrounding Brexit consists mostly of an expert consensus that a Brexit would be disastrous for the UK. Let's unpackage this a little bit.
First, the Overton Window of acceptable political discourse in the UK appears to share commonality with the media narrative across the pond: politics is run by experts. Like a Matryoshka doll, we unpackage this idea and find another, smaller idea: politics, and the social sciences in general, are as a boat in a predictable sea of causation and experts are the captain who steers the till.
We could stop at this adorable, smaller Russian doll; but, then, we would deprive ourselves of smaller, more adorable dolls.
A politician or political consultant gains expertise by obtaining the necessary credentials; the necessary credentials are legitimate because the social sciences are, like physics, subject to the regular concatenation of natural phenomena; and, to tie up this memeplex in a nice bow, those credentialed at the most prestigious schools for social sciences are the experts who steer the worlds economic and political policies.
Thus, we arrive at the final doll: an adorable technocrat: a Harvard grad who spent time in the London School of Economics, did a stint at Goldman and is now an unelected official of a central bank or supranational entity like the UN or EU. While the technocrat is the height of expertise, there are many who would aspire to this position, but fall short. The opinion of these people (professors of economics, pundits at popular newspapers, talking heads, bureaucrats, etc...) still carries expert weight and when the opinions of all the experts reach critical mass, we reach the black hole of the social sciences: consensus.
The alternative view to technocracy, and a view that is outside the frame of the Overton Window, is that individual humans are the subject of the social sciences. The ideas that animate human actions are currently unmeasurable and by introspection we find that our own motivations are a complicated mess of competing interests. While humans in general display trends, they remain a rather unpredictable subject in contrast to the movement of particles in a vacuum whose interactions exhibit such regularity that we refer to theories of their behavior in some cases as laws.
Gravity, electromagnetism and mechanics are enough understood to the point that our complex society relies on the laws of their behavior remaining static. If gravity changed tomorrow, or oppositely charged particles no longer attracted, we would find chaos now ruled where order once did.
Conversely, if humans in my general vicinity tomorrow decide that aviator sunglasses are posh again, a new trend in human behavior has developed in favor of an older one. The individual human actions that create the market for sunglasses will respond by decreasing the availability of Wayfarers and increase the availability of aviators. If bomber jackets came to be preferred as well, we would all look like pilots in a very brief period of time.
What does this have to do with Brexit? If I google sunglasses, I am gifted with 174,000,000 results. If I click on one of the first links to Zappos, I am offered the option of browsing sunglasses by the geometric shape of my face. There are a lot of individuals interested in satisfying my need for sunglasses and it would behoove them greatly to know what I wanted before I did. The number of participants in the market makes evident the fact that very few people are successfully predicting and monopolizing the market for sunglasses. This is basically true for most markets, and is true in general about the predictability of human action.
In short: politicians, economists and pundits do not know what the consequences of Brexit would be. If they did, they would be billionaires and likely to be uninterested in trying convince other people of what they already knew: individual human action is impossible to predict and you'd be lucky to spot a trend.
Showing posts with label forecasting. Show all posts
Showing posts with label forecasting. Show all posts
Wednesday, June 22, 2016
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?
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?
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