An excellent and provocative review. The nub of the critique:
bq. Tetlock divided his experts into foxes (good at many things) and hedgehogs (good at one thing) and argued that hedgehogs are over-confident because they “reduce the problem to some core theoretical scheme’… and they used that theme over and over, like a template, to stamp out predictions”. And that’s exactly what Harford does here. He sees evolution as a fox-like strategy (trying many things and selecting a few) but doesn’t notice that at the level of individual species, evolution gives us both foxes and hedgehogs, and both do perfectly fine. Once the contradiction at the heart of the book is clear, it is not surprising that the book itself cherry picks examples where trial-and-error has succeeded, or where eggs-in-one-basket has failed. But such stories, while entertaining, make a notoriously shaky foundation for any kind of general structure, and so it proves here.
Or, to put it a little more abstractly, mechanisms of evolutionary selection and processes of wilful experimentation are not the same thing. Read the whole thing. I’m also looking forward very much to Tom’s forthcoming take on Duncan Watts’ _Everything is Obvious: Once You Know the Answer_, which I liked a lot (although I suspect that Kieran might have some sharp words to say about Watts’ discussion of the effect of presumed consent defaults on organ donations).
{ 29 comments }
william u. 06.06.11 at 3:08 pm
Incidentally, the Nature review was written by Matt Ridley, who had significant, firsthand experience with failure at Northern Rock.
Alex 06.06.11 at 3:21 pm
I recall that Daniel Davies had some amusing things to say about fox vs. hedgehog, namely that the one big thing the hedgehog knows is to curl up in a ball and hope its problems go away.
Salient 06.06.11 at 3:44 pm
Harford: The difference between market-based economies and centrally-planned disasters… is not that markets avoid failure. It’s that large-scale failures do not seem to have the same dire consequences for the market as they do for planned economies. (Gratuitous reference to Mao snipped.)
This is exactly the sort of thing I thought nobody would be capable of saying with a straight face after, say, 2008. But given that it is said, I believe he is supposed to conclude, Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson.
Brian Weatherson 06.06.11 at 3:58 pm
This is exactly the sort of thing I thought nobody would be capable of saying with a straight face after, say, 2008.
I thought it was the kind of thing no one could say with a straight face after 1929.
mds 06.06.11 at 4:18 pm
What you’re missing, Salient and Mr. Weatherson, is that in both 1929 and 2008, the problem was that the economy was still too centrally planned. We wouldn’t have had the 2008 collapse if it weren’t for the Community Reinvestment Act, and we wouldn’t have had the 1929 collapse if it weren’t for the Federal Reserve Act. Things would have turned out much better in both cases if only business-friendly regulation-averse Republican presidents had been in charge.
Frank in midtown 06.06.11 at 4:34 pm
Specialists learn more and more about less and less until they know everything about nothing. Generalists learn less and less about more and more until they know nothing about everything. Both processes produce confident, productive individuals. There is obviously a darwinistic advantage to overconfidence given its pervasiveness.
@MDS you are one funny troll!
Edward 06.06.11 at 5:00 pm
Snipping the Mao reference is dodging the point. The financial crises of recent years, and even the Great Depression, genuinely were not as bad as centrally-planned equivalents like the Great Leap Forward or the Holodomor. People were poorly-off, not dead. This is an argument for a welfare state, but it is also further evidence (if such were needed) that market organisation and decentralisation are superior to planning.
ejh 06.06.11 at 5:34 pm
mds – see what happens if you use irony on the internet.
soullite 06.06.11 at 5:39 pm
Frank, there actually is. Humans have a well-established status-quo bias and will almost always overestimate associated with change. As a result, what most people consider ‘over-confidence’ will lead to a more accurate appraisal of the reward for taking a risk even if it doesn’t more accurately appraise the likelihood of success.
The big question is: Why does human nature reward something that nature itself punishes? I’d imagine the answer is something like ‘blah blah… group dynamics… blah blah blah… severe weakness to the point of utter helplessness for the first dozen years of life… blah blah blah blah.”
soullite 06.06.11 at 5:39 pm
err. risks associated with change.
mds 06.06.11 at 5:52 pm
Oh, I assure you, ejh, I have plenty of experience of the backlash from omitting the sarcasm tags; I just refuse to learn from experience. I consider it my little ongoing homage to the University of Chicago Economics Department.
On the other hand, my comment could be considered bait for CT’s right-schmibertarian contingent, at least part of which apparently believes those things, which would make the remark a form of trolling and / or flaming. That sort of inflammatory behavior is part of the reason why Peter Diamond is on the Federal Reserve Board** and I’m not.
**(Oh, wait, no, a bought-and-paid-for dumbshit from Alabama declared him unqualified and was backed up by his fellow Republican nihilists. Never mind.)
kharris 06.06.11 at 7:28 pm
“**(Oh, wait, no, a bought-and-paid-for dumbshit from Alabama declared him unqualified and was backed up by his fellow Republican nihilists. Never mind.)”
Ah, but Shelby only managed to drive Diamond out with support from the nihilist from Kentucky. The first two tries, Diamond got Republican votes from the Banking Committee. Then, McConnell said “defer to Senator Shelby” and the greatest deliberative body on earth (sic) turned into a clone club – the Republicans on the Banking Committee all changed their votes.
adam@nope.com 06.06.11 at 8:05 pm
The basic issue in the review seems to be how to balance exploration versus exploitation. If the environment isn’t changing, then exploration is a waste of resources, effort should be expended instead on exploitation of the best known policy.
On the other hand, if the environment is changing, some level of exploration is desireable, as it might discover a more optimal policy. As to what that optimal level of exploration is? Have fun determining that!
Danny Yee 06.06.11 at 8:58 pm
The only Harford I’ve read is The Logic of Life, but my review of that did contain the sentence “Harford’s
grasp of evolutionary biology and history seems fairly shallow.”
mw 06.06.11 at 11:52 pm
As to what that optimal level of exploration is? Have fun determining that!
http://en.wikipedia.org/wiki/Multi-armed_bandit
John Quiggin 06.07.11 at 12:45 am
We had some interesting discussion of this on the I, Pencil thread a while back. One way of putting the discussion is that, among free-market economists, Hayek is a hedgehog, Coase more of a fox.
tomslee 06.07.11 at 1:14 am
the Nature review was written by Matt Ridley
Not surprising that he loved the book then. Very much in the same mold as Origins of Virtue.
We had some interesting discussion of this on the I, Pencil thread a while back.
Adapt starts off with an I, Toaster story and I nearly linked to your I, Pencil post. Which would have been nicely circular for a hedgehog reference.
Peter T 06.07.11 at 8:35 am
Edward
as opposed to the “centrally-planned” Irish Famine? Or the “centrally-planned” Bengal Famine? Or the centrally-planned Congo experiment? Around 35 million Chinese died from famine in the first half of the 20th century – arguably from lack of central control. Point is not to exonerate Mao or Stalin, but to point out that complex series of events should not be reduced to simple causes, and that, historically, every system has gone badly wrong from time to time.
Latro 06.07.11 at 11:32 am
Neoliberal automobile design: if your engine is too powerful to be controlled by the steering wheel and brakes , then it is clear that the problem is that you should not have steering wheels of brakes!
Although I’m starting to think there is some truth in this; if we didnt have our “centrally planned” States ready to cover for their humongous losses and the finantial geniuses had to eat their losses, well, maybe the damage on the short run would have been greater, but in the long run we may be rid of the “overconfident” gamblers. And they would keep their ideological purity – but not their shirts.
Latro 06.07.11 at 11:32 am
“or brakes” (sorry)
adam@nope.com 06.07.11 at 4:13 pm
@MW
Thank you. Your reference shows how difficult this problem is, even for extremely simple models of decision making.
As I said before – have fun figuring out an optimal balance of exploration and exploitation.
tomslee 06.07.11 at 4:24 pm
@MW: Thanks from me too for posting the multi-armed bandit stuff. I’d never seen it and it’s fascinating. How come it doesn’t come up in any of the books on predictions and decision making I’ve been reading?
adam@nope.com 06.07.11 at 5:39 pm
@tomslee
It’s useful problem for discussing reinforcement learning algorithms.
http://books.google.com/books/about/Reinforcement_learning.html?id=CAFR6IBF4xYC
Here is a good basic book on reinforcement learning. Starts out with dynamic programing and gets progessively more complicated. Had a class with Professor Barto that used it – it was a great class. Really liked the idea of an algorithm that generates a policy for decision-making as the output of the algorithm.
Cahal 06.07.11 at 6:58 pm
Edward,
Stalin is an easy target because there is no information available on, say, the IMF’s kill count, who have championed ‘market’ policies in developing countries for decades with disastrous consequences.
You might say that the IMF itself is a centrally planned institution created by governments – and this is true to a certain extent, but ultimately situations like that are created by hidden corporate interests.
chris 06.07.11 at 8:16 pm
@24: Corporations are often instruments of central planning, too. Someone who was really consistently opposed to central planning would look for ways to limit it whether it wears a badge or not. But now we’re in danger of moving beyond glib cheering for Hayek.
Cahal 06.07.11 at 9:48 pm
Agree, and I’m not sure if I buy the common assertion that big business is simply created by regulations and governments in general. Just seems like a natural progression to me; as the economy gets bigger, the businesses get bigger. Bit like Newtonian physics vs. relativity.
banflaw 06.08.11 at 12:17 am
We do love our dichotomies don’t we we humans
If there are 7 types of ambiguity, shouldn’t there be at least 7 types of thinker?
Tim Worstall 06.08.11 at 7:08 am
“As I said before – have fun figuring out an optimal balance of exploration and exploitation.”
That’s pretty much the message that I got from the book. No one actually knows, nor can, what the optimal balance is. Which is fun, no?
Cahal 06.11.11 at 6:42 pm
Well, yes, until millions of people starve to death when we get it wrong.
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