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Your reasoning is an example of failing to understand the difference between a random variable and an exposure to a random variable. Experts are almost always
by quantdev 9y ago
Your reasoning is an example of failing to understand the difference between a random variable and an exposure to a random variable.
Experts are almost always right when the outcome is irrelevant. Economists can accurately predict next year's GDP growth most of time, sure. Except that time they're all somehow wrong at the same time and it's a massive miss and we enter a recession. This is really the only time we care about them being right ("Housing can't be in a bubble").
Until economists are financially harmed or benefited in proportion to how bad or good their predictions are, they won't understand this idea either.
- parenthephobia 9y agoSounds like reverse survival bias to me. Experts are usually right, so people make financial decisions on that basis. When it turns out the experts were wrong, those decisions don't pan out. The worse the outcome, the more likely we are to hear about it. We don't hear about all the times that following expert advice doesn't lead to an economic disaster, even though it happens nearly every day.