How do we measure it? - Accuracy - True positives at the cost of false alarms? - Risks of overpredicting vs underpredicting Should false alarms and hits be weighed equally? E.g., what is riskier: - in the 1980s, - underestimate the Soviet Union, tempting them to test the US's resolve? - Overestimate them and pay high military costs I.e., the risk here is to treat as `wrong' forecasters those who have made value-driven decisions to exaggerate certain possibilities. - How early?
Interdeterminacy is due to the properties of the external world. A world that would be just as unpredictable if we were smarter. - Path dependency, aka increasing returns - QWERTY - Polya's urn: Small initial advantages accumulate - Rise of the West - Tiny advantages that Europe had: property rights, rule of law, market competition - Hard to know whether we face an increasing- or decreasing returns world. Ie., does history have a diverging branching structure that leads to a variety of possible worlds, or a converging structure that channels us into destinations predetermined long ago - Cleopatra's nose.
Complexity theorists Aka, the butterfly effect
We mispredict because of the way our minds work
(optional) For those interested, see discussion on calibration vs discrimination:
Specification error: no model of a complex, open system can contain all of the relevant variables; I Measurement error: with very few exceptions, variables will contain some measurement error I presupposing there is even agreement on what the “correct” measurement is in an ideal setting; I Predictive accuracy is limited by the square root of measurement error: in a bivariate model if your reliability is 80%, your accuracy can’t be more than 90% I This biases the coefficient estimates as well as the predictions I Quasi-random structural error: Complex and chaotic deterministic systems behave as if they were random under at least some parameter combinations . E.g., rabbit population
Effective policy response: in at least some instances organizations will have taken steps to head off a crisis that would have otherwise occurred.