Will belief trump facts?

Source: http://blogs.reuters.com/chrystia-freeland/2011/09/02/will-belief-trump-facts/

Chrystia Freeland

Will belief trump facts?

SEP 2, 2011 10:59 EDT

You might call it the cognitive divide — the split between an evidence-based worldview and one that is rooted in faith or ideology — and it is one of the most important fault lines in the United States today.

President Barack Obama called attention to the cognitive divide, and reminded us which side he comes down on, at the beginning of this week, when he chose the Princeton University economist Alan Krueger to lead his Council of Economic Advisers.

Krueger is a labor economist, and at first blush, that focus may seem the important part of his résumé. Unemployment, after all, is still above 9 percent, and the president has said job creation is his priority. But when you talk to the insiders about Krueger, what they emphasize is his mastery of data and his utter commitment to the truths it can be coaxed to tell.

Lawrence Summers, the former Treasury secretary and a Harvard economist, described Krueger, his former student, as a “total empiricist” and a “great data monger following the data where it went.” Lawrence Katz, a fellow Harvard economist and one of the pre-eminent labor economists, enthusiastically agreed: “Alan has an open mind and lets the data speak.”

Krueger’s passion for data runs so deep that one of his major professional projects has been, as Katz put it, “to actually improve the data.” Krueger was the founding director of Princeton’s Survey Research Center. When he can’t find the data he needs to answer a particular question, he goes out and gets it.

“Alan is almost unique among leading economists in that much of his work is based on additional data he collected,” said Justin Wolfers, a professor at Wharton Business School at the University of Pennsylvania.

Krueger’s devotion to data is a key to understanding a question that has been puzzling a lot of Americans as they reflect on the past three years, and start thinking about how they will vote in the upcoming one: What does Obama really stand for?

To his critics on the right, the president is a socialist with dangerous foreign antecedents. To his critics on the left, he is a waffler with no real point of view and a craven desire to be liked.

Krueger’s nomination points to an entirely different explanation: The president is an empiricist. He wants to do what works, not what conforms to a particular ideology or what pleases a particular constituency. His core belief is a belief in facts.

Obama the empiricist is not the man who surged from behind to win the 2008 presidential election. That candidate was the Obama of soaring rhetoric, who promised hope and change.

But the pragmatist has always been there. Writing in September 2008, several weeks before the presidential election, Cass Sunstein, who has gone on to serve in the White House, had this to say about his candidate: “Above all, Obama’s form of pragmatism is heavily empirical; he wants to know what works.” Word crunchers found that the president’s 2009 inaugural address was the first one to use the term “data” and only the second to mention “statistics.”

That cognitive approach is one reason Obama attracted so much support, especially among younger people, on Wall Street and in Silicon Valley. Obama is a data-driven technocrat, and so are the traders and the Internet entrepreneurs. As one insider, who is equally familiar with Wall Street and with Washington, told me: “You want your money managed by people who are responsive to evidence, who care about results and who understand that the world is an uncertain place. Obama wants to get his economic advice from the same sorts of people.”

But as the presidential campaign begins to heat up, starting with the Republican primary race, the empirical worldview that Obama embodies is taking a beating. The candidates who have made the strongest start are those with a proudly faith-based approach. According to a Quinnipiac University poll released this week, Governor Rick Perry of Texas is the Republican front-runner. He spoke at a Christian religious rally on the eve of entering the primary contest last month and has questioned the science of evolution and climate change.

The Republican Party has its own evidence-based candidates, and they are struggling to respond to the faith-based worldview that Perry so powerfully embodies. One of them, Jon M. Huntsman Jr., is playing up his credentials as the right’s empiricist. He has said he thinks climate change is a fact and warned Republicans against becoming the “anti-science party.”

Mitt Romney, who was the front-runner before Perry blazed onto the scene, has been more ambivalent. Romney’s business background puts him squarely in the camp of the empiricists: it is hard to make millions in private equity without appreciating the power of data. But Romney knows who votes in Republican primaries, and last week he hedged his previously explicit position on climate change.

The divide between the empiricists and the believers is also the fault line between the highly educated, technologically adept super-elite and the squeezed and scared middle class. But those hoi polloi voters, who, in 2012, as they were in 2008, seem to be drawn to politicians with big ideas and strong beliefs, may also be responding to something even bigger than this cognitive divide.

We are today, as we were in 2008, living through an unprecedented crisis. The economies of the Western world are sick, and the international balance of power is shifting. To be driven by data is an admirable thing. But when you find yourself in dangerous and uncharted waters, there is no data to guide you.

The perils of prediction - Adventures in punditry - The economist

Source: http://www.economist.com/blogs/freeexchange/2011/09/perils-prediction?fsrc=rscn/fb/wl/bl/adventuresinpunditry

The perils of prediction

Adventures in punditry

Sep 2nd 2011, 20:32 by E.G. | AUSTIN

JOURNALISTS have a professional obligation to produce reasoned analysis, and this occasionally leads us to take a step too far, into predictions. As a journalist wary of the hazards of forecasting, the “Good Judgment Project”, a joint effort from the University of Pennsylvania and the University of California-Berkeley, caught my eye. One of its architects is Philip Tetlock, a political scientist who mildly traumatised the pundit class with his research finding that over a 20-year span, a group of “experts”—mostly political scientists and economists—were only slightly better at predicting political outcomes than Berkeley undergraduates or for that matter random guessing. Now Mr Tetlock and his colleagues are assembling teams of “forecasters”, who are being asked to complete some training and then compete in a government-sponsored forecasting tournament over the next four years.

The training is designed to encourage forecasters to think systematically about their biases and to actively anticipate different scenarios. I just completed the first round of training, and it was an interesting exercise. In the scenarios they presented, the premise was that forecasters tend to be overconfident in their judgments. You might start out thinking there’s a 90% chance that Kim Jong-Il will still be in charge of North Korea at the end of next year, but after considering the possibility that he might lose elite support, or that Chinese subsidies might be withdrawn, maybe you end up thinking there’s about a 74% chance.

Interestingly, these scenarios mostly affected the confidence level of the forecaster, not the content of his or her prediction. So my reaction was that this kind of process may encourage more accurate predictions, but they may be more accurate because they’re less specific. For example, if you aspire to be 90% sure of what you’re saying, after thinking through all the exogeneous factors, you might predict that the price of Brent crude oil will be between $50 and $250 dollars at the end of next year, rather than between $80 and $120.

That may be more accurate, but it’s also less useful. There are certain decisions you would take if you thought oil would cost $100 a barrel, and they’re different than the decisions you would take if you effectively had no clue. And with regard to the political economy of punditry, we are sometimes asked to take rather stronger stances. My editor got a bit exasperated with me earlier this summer, when I was firmly arguing that Texas governor Rick Perry might run for president; under inquiry, all I could do was clarify the conditions under which he would run and factors that might keep him on the sidelines, but for some reason this wasn’t considered a compelling line of argument.

More to the point, though, is that sometimes less confident predictions are nonetheless worth making. When we’re writing about politics, or the economy—areas in which changes are routinely expected, and the anticipation of future developments affects people’s behaviour in the present—it may even be necessary. The perceived likelihood of those future developments affects both actual behaviour and expectations, and the expectations themselves have effects, as we see today, in the stock market’s response to the jobs report. If people are going to make decisions based on predictions about the future, it may be better for them to proceed with confidence, even if they are professing more confidence than they actually feel.

So how are we to understand these exercises in punditry? Mr Tetlock has long argued that what we need is some form of accountability in punditry. As it is there is rarely a real penalty to the expert for being wrong, even if other people suffer consequences. But we also need to preserve some space for experts to be wrong, because otherwise they would be dissuaded from going out on a limb about anything (perhaps ceding the space to less scrupulous observers). It may be that we need to be more actively uncomfortable with uncertainty, and ask our forecasters to qualify their predictions by stating their assumptions and articulating the counterfactuals as far as they can see them.