Tuesday, March 18, 2014

On 538: Nate Silver Should Listen To Paul Krugman

Further Thoughts on Hedgehogs and Foxes
I loved Nate's poll work over the last few big election cycles.  I hope the wizard will take some constructive advice from the professor.
"It's true that I haven't changed my views on macroeconomics very much in the face of experience since 2008 — although I did mark down my views about the risks of outright deflation. But the reason I've pretty much stayed with the macro framework I already had in 2008 was the fact that the framework, you know, has worked — I made predictions about interest rates and inflation that were very much at odds with what a lot of people were saying, and I was right. And right there you have an important lesson about what it means to take data into account. It very much does not mean changing your views all the time — if you have a model of how the world works, and the model is working, stability in what you say reflects respect for the data, not inflexibility. If I have spent the past 5+ years insisting, over and over again, that in a liquidity trap budget deficits don't crowd out private spending and expanding the Fed's balance sheet doesn't cause inflation, that's because they don't. And if I return to those points many times, it's because too much of the world still doesn't get it. Now, about FiveThirtyEight: I hope that Nate Silver understands what it actually means to be a fox. The fox, according to Archilocus, knows many things. But he does know these things — he doesn't approach each topic as a blank slate, or imagine that there are general-purpose data-analysis tools that absolve him from any need to understand the particular subject he's tackling. Even the most basic question — where are the data I need? — often takes a fair bit of expertise; I know my way around macro data and some (but not all) trade data, but I turn to real experts for guidance on health data, labor market data, and more."

Unlike Judy Miller, Krugman has been time and again "proved fucking right", as Miller famously claimed regarding her WMD fabulism in terms the Grey Lady would never deign to print.

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