Sunday, February 15, 2009

Black swan takedown

Via Andrew Gelman's wonderful blog, a link to an excellent review of Taleb's Black Swan by legendary Bayesian statistician Dennis Lindley (you don't have to be a mathematician to follow this):

My feeling from reading Taleb and seeing him speak is that although he thinks he has found some huge flaw in probability (his hubris really is breathtaking), his real beef is not with probability or statistics but with finance. His critique is really one of conflicts of interest, perverse incentives and so on: he is talking about political economy, not mathematics.

And from that perspective, he's quite right. Building bogus models and making nonsense predictions pays pretty well (and continues to do so), so it's really just another case for that Upton Sinclair quote I use too much: "It is difficult to get a man to understand something when his job depends on not understanding it.


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