Working Papers

Punditry and Cognitive Bias

A review of Philip Tetlock’s Expert Political Judgment : How Good is It? How Can We Know?

people who appear as experts on television, get quoted in newspaper articles, advise governments and businesses, and participate in punditry roundtables—are no better than the rest of us. When they’re wrong, they’re rarely held accountable, and they rarely admit it, either…They have the same repertoire of self-justifications that everyone has, and are no more inclined than anyone else to revise their beliefs about the way the world works, or ought to work, just because they made a mistake…

the better known and more frequently quoted they are, the less reliable their guesses about the future are likely to be. The accuracy of an expert’s predictions actually has an inverse relationship to his or her self-confidence, renown, and, beyond a certain point, depth of knowledge. People who follow current events by reading the papers and newsmagazines regularly can guess what is likely to happen about as accurately as the specialists whom the papers quote. Our system of expertise is completely inside out: it rewards bad judgments over good ones.

posted on 11 December 2005 by skirchner in Economics

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Thinking back 12-24 months, I remember plenty of pundits predicting a correction in the housing market, but don’t recall *anyone* predicting a resources boom just as the housing market was coming off the boil.  Without the resources boom I reckon there’s a fair chance Australia would be in recession now.  NSW possibly is anyway.

Posted by .(JavaScript must be enabled to view this email address)  on  12/14  at  01:37 PM

The resources boom caught most people out, as evidenced by the underinvestment in this sector up until recently. This is one of the reasons export vol.s are now struggling.

NSW is half way to meeting the definition of recession, having just had a quarter of negative growth in state final demand.

Posted by skirchner  on  12/14  at  03:35 PM

As someone who derives 95% of their income from exports, I can tell you what’s really hurting exporters is the Australian dollar.  The AUD surged from around 55c to 80c during 2003 and has remained in the mid 70s ever since.  That big surge the dollar pretty much wiped out our margin.  We were investing and hiring in 2002, now we’re struggling to break even.

Another piece of punditry I recall (just 3-4 weeks ago I think) was that the $AUD was heading to 70c by years end.  Now it looks like it will be closer to 80c.  Arrrggghhhh!

Just 15 days ago you posted about Buffet and Gates failed bets against the US dollar:
Well, guess what?  The US CAD blew out again, gold rocketed past $500, and the AUD is up 3 cents in 3 weeks.  It all adds up to very miserable time for Australian exporters who aren’t digging stuff out of the ground.

Posted by .(JavaScript must be enabled to view this email address)  on  12/15  at  10:20 AM

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