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Economic View - The Overconfidence Problem in Forecasting - NYTimes.com - 1 views

www.nytimes.com/...22view.html

Economics Human Sciences prediction Emotion

shared by anonymous on 23 Aug 10 - Cached
  • BUSINESSES in nearly every industry were caught off guard by the Great Recession. Few leaders in business — or government, for that matter — seem to have even considered the possibility that an economic downturn of this magnitude could happen.
  • What was wrong with their thinking? These decision-makers may have been betrayed by a flaw that has been documented in hundreds of studies: overconfidence.
    • anonymous
      anonymous on 23 Aug 10
       
      Overconfidence! Emotion blinding one to reality. Hubris is what the Greeks called it. No matter how mathematical the Wall Street Quants (MIT, CalTech graduates who have been hired in huge numbers to write algorithms to figure out the stock market) try to make things, human emotions and personalities will always play a factor in any prediction in economics or any science for that matter.
  • ...4 more annotations...
  • Most of us think that we are “better than average” in most things. We are also “miscalibrated,” meaning that our sense of the probability of events doesn’t line up with reality. When we say we are sure about a certain fact, for example, we may well be right only half the time.
    • anonymous
      anonymous on 23 Aug 10
       
      Hopefully, by now, you see this as a totally TOK paragraph!!!
  • Some economists have questioned whether such experimental findings are relevant in competitive markets. They suggest that students, who often serve as guinea pigs in such tests, are overconfident, but that the top managers in large companies are well calibrated. A recent paper, however, reveals that this hopeful view is itself overconfident.
    • anonymous
      anonymous on 23 Aug 10
       
      Great relevance to this year's TOK Essay Topic #2 "How important are the opinions of experts in the search for knowledge?"
  • anonymous on 23 Aug 10
     
    "BUSINESSES in nearly every industry were caught off guard by the Great Recession. Few leaders in business - or government, for that matter - seem to have even considered the possibility that an economic downturn of this magnitude could happen. "
anonymous

Currents - Are Metrics Blinding Our Perception? - NYTimes.com - 1 views

www.nytimes.com/...21iht-currents.html

metrics Human Science measurement Math quants Sense Perception

shared by anonymous on 07 Sep 10 - No Cached
  • Computers have become an extension of us: that is a commonplace now. But in an important way we may be becoming an extension of them, in turn. Computers are digital — that is, they turn everything into numbers; that is their way of seeing. And in the computer age we may be living through the digitization of our minds, even when they are offline: a slow-burning quantification of human affairs that promises or threatens, depending on your outlook, to crowd out other categories of the imagination, other ways of perceiving.
  • Welcome to the Age of Metrics — or to the End of Instinct. Metrics are everywhere. It is increasingly with them that we decide what to read, what stocks to buy, which poor people to feed, which athletes to recruit, which films and restaurants to try.
  • The once-mysterious formation of tastes is becoming a quantitative science, as services like Netflix and Pandora and StumbleUpon deploy algorithms to predict, and shape, what we like to watch, listen to and read.
  • ...8 more annotations...
  • depriving us of the self-fortifying act of choosing. What will it mean to prefer one genre of song when you have never confronted others? It is one thing to love your country because you have seen the world and love it still; it is quite another to love it because you know nothing else.
  • Focusing on the wrong metrics already distorts policy-making around the world
  • We use gross domestic product to measure everything. It makes it easy to compare economies, but it makes us undervalue what cannot be measured, the report said. Trees are killed because the sales from paper are countable, while a forest’s worth is not. Unemployment grants are cut because their cost is plain, while the mental-health cost of idleness is vague.
  • In short, what we know instinctively, data can make us forget.
  • the world’s saturation by business logic.
  • metrics were valuable tools but were in danger of squelching other ways of perceiving.
  • “In this world in which we are so centered on metrics, those things that are not measured get left off the agenda,” he said. “You need a metric to fight a metric.”
  • decide how metrics might inform our decisions without becoming them.
  • anonymous on 07 Sep 10
     
    Computers have become an extension of us: that is a commonplace now. But in an important way we may be becoming an extension of them, in turn. Computers are digital - that is, they turn everything into numbers; that is their way of seeing. And in the computer age we may be living through the digitization of our minds, even when they are offline: a slow-burning quantification of human affairs that promises or threatens, depending on your outlook, to crowd out other categories of the imagination, other ways of perceiving.
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