"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Wednesday, July 18, 2007

B-schools vs Scientists

I don't have much intellectual respect for B-school (school of business) types, and unlike most scientists I have had some dealings with them. It appears the pseudo-skeptics are getting a lot of mileage out of some bet that Al Gore is justifiably ignoring and some generic principles that do not apply promulgated by a Professor Armstrong.

I said in the comments to another article:
So the person behind forecastingprinciples.com accuses climate science of being unaware of forecastingprinciples.com . To this accusation I for one plead guilty.

He isn't moving the goalposts, he is inventing the game.

It is certainly the case that the sorts of forecasts he dwells on on his site are very difficult.


On the other hand, a forecast of the position of Jupiter in the sky exactly 50,000 years hence is quite feasible.

Climate physics is more constrained than social dynamics and less constrained than the orbits of the planets. So we can get more than 5 years and less than 50,000.

Beyond that you have to get into detail.

These guys are promulgating purported universal principles on the basis of an argument from authority, when as far as I can tell the only basis for their authority is having registered "forecastingprinciples.com".

Well, I registered 3planes.com some years ago. This means that anyone claiming to be three-dimensional will have to pass 83 criteria identified by me.
Well, that last bit goes a tiny bit too far. It appears that Armstrong has some authority. He is a professor at the esteemed Wharton School of Business.

While I am sure the Wharton School is more respected than the U Wisconsin - Madison B-School I have a couple of anecdotes about one of the most popular and respected professors at UW, a recent emeritus from whom I took a minicourse in management. I was universally assured by the B-school that this was an extraordinary opportunity.

The good professor X, whom I shall not further embarass by identifying, suggested that it is "not all that hard to start a business". He reported on an extensive survey over several business categories which he did by simply comparing the yellow pages (business phone directories) from two years a decade apart (say 1989 and 1999). He asserted that 80% of the businesses in the 1989 directory were around in 1999, and that therefore the rate of successful startups (defined as lasting a decade or longer) was clearly 80%. (Think about it.) The words "sample bias" escaped neither his lips nor those of any of the students. Nor did he distinguish between startups and existing businesses at all.

That was bad enough, but the time he used the question numbers on a questionnaire to weight the results really had me slapping my forehead. He made several other glaring logical errors. I saw the other engineer in the room rolling his eyes on one occasion. Everyone else was diligently writing down everything the illustrious professor X was saying.

To be honest, I did get a couple of insights from this course into how MBAs think, not all of them pretty but not all of them horrible either. It did strike me that they had essentially zero skill in quantitative reasoning though; they make economists look like von Neumann.

My father likes to tell the story of the successful illiterate businessman from the shtetl:
"Look, from factory in Minsk, I buy each piece for hundred ruble," he says. "In market at Omsk I sell each piece for three hundred ruble. And from this three percent (shrug) I make a living."
Anyway, James makes clear why it's not a bet worth taking, but implies that it is surely dishonest. I think this gives business people too much credit. Armstrong may or may not have chosen the points of comparison disingenuously. It may just be a perfectly honestly constituted invalid metric, an instance of Hanlon's Razor.

My father also has this to say about B-school types:
"If they know so much about how to get rich, why would they be telling you?"
Which disciplines to esteem and which not to in decision making is a difficult problem. Authority and competence may shift as time passes. As long as decision makers listen to bad advice more than they listen to good advice, we will have serious problems.

Is there some systematic way to tell the difference?

Update: Unfortunately but unsurprisingly this nonsense has made the op-ed section of the Wall Street Journal. That makes this interesting story relevant.

Update: The Armstrong thing is further dissected on RealClimate. The concluding summary says all you need to know.


Venezuela We Are With You Coalition said...

I agree with your post. But your opening sentence is a hilarious example of self-undermining prose:

"I don't have much intelelctual respect for B-school ..."

Michael Tobis said...

fixed, thanks.

Hank Roberts said...

He's a professor of _marketing_.

See the academic study and legal/regulatory definition of "puffery" -- if it were good advice, it wouldn't be called marketing, would it?


James Annan said...

"Surely dishonest" is a bit stronger than I would actually say, but I do think it's reasonable to presume that a professor who has written a book ostensibly on "forecasting" should know what he is talking about.

He still hasn't replied meaningfully to my email. Not sure whether it is worth prodding him again or whether the sorry tale should be allowed to die a natural death. Of course the denialist ditto-heads are doing their best to puff it up.

Dano said...

Is there some systematic way to tell the difference?

It depends upon the decision, in my view. And whether you want a replicable system [many ways of knowing are not replicable, sorry].

My thesis was about how to frame scientific information for decision-makers in order to make it actionable; I found that for certain information (for decisions across large scales for large numbers) who gets and who pays wins the day. Scaling down becomes problematic as the decision-maker relies on different ways of knowing, weighted by experience, aptitude, etc.

IOW, it becomes an interpersonal skills test, as all good staffers know.



ankh said...

'Die a natural death' seems right. I see he sent someone to flog his "bet" to RC a few days ago. Smells like blogspamming.

Michael Tobis said...

Somewhat related to Hanlon's Razor is the Wilis Exegesis:

A long time ago I used to believe that a lot of these people were just talking over my head, their discourse too lofty for a regular guy like myself. But that isn't true. They're just stupid. -- Oliver Willis

Steven said...

My father also has this to say about B-school types:

"If they know so much about how to get rich, why would they be telling you?"


I don't know the exact degrees to which you are applying this quote from your father. If it's simple a passing joke, that's fine. I loved your use of the 3planes.com joke and I promise to steal it at my first opportunity.

However, if you mean to apply that quote to actually relate something of value relating to science, economics, business etc. I think it exposes a very common but completely mistaken belief (about economics).

This is somewhat related to the questions on another page- applying science questions (about closed systems and conservation etc.) to economics.

I think those are worthy questions, and I have been considering how I want to frame my response to them. I will be posting, back on that particular thread soon.

I'll just leave this part here; there is no underlying principle in economics that if a professor knows how to get rich he would be undermining himself by teaching, say, 30 students, those methods.

If that's not understood, absorbed, or agreed with, I can clarify/defend later.