The Signal and the Noise: Why So Many Predictions Fail-but Some Don't

by Nate Silver

Bayer Laboratories recently confirmed Ioannidis’s hypothesis. They could not replicate about two-thirds of the positive findings claimed in medical journals when they attempted the experiments themselves.

After adjusting for inflation, a $10,000 investment made in a home in 1896 would be worth just $10,600 in 1996.

Shiller, studying data going back hundreds of years in countries from the Netherlands to Norway, found that as real estate grew to unaffordable levels a crash almost inevitably followed.

“wealth effect”—is

The uncertainty in an unemployment rate forecast97 made during a recession had historically been about plus or minus 2 percent.

“The fox knows many little things, but the hedgehog knows one big thing.”

Although the scouts’ judgment is sometimes flawed, they were adding plenty of value: their forecasts were about 15 percent better than ones that relied on statistics alone.

This new technology will not kill scouting any more than Moneyball did, but it may change its emphasis toward the things that are even harder to quantify and where the information is more exclusive,

(The NWS gets by on just $900 million per year28—about $3 per U.S. citizen—even though weather has direct effects on some 20 percent of the nation’s economy.

According to the agency’s statistics, humans improve the accuracy of precipitation forecasts by about 25 percent over the computer guidance alone,31 and temperature forecasts by about 10 percent.32 Moreover, according to Hoke, these ratios have been relatively constant over time: as much progress as the computers have made, his forecasters continue to add value on top of it.

In reality, when a group of economists give you their GDP forecast, the true 90 percent prediction interval—based on how these forecasts have actually performed20 and not on how accurate the economists claim them to be—spans about 6.4 points of GDP (equivalent to a margin of error of plus or minus 3.2 percent).*

Hatzius penned a provocative memo entitled “Leveraged Losses: Why Mortgage Defaults Matter.”

As Hatzius sees it, economic forecasters face three fundamental challenges. First, it is very hard to determine cause and effect from economic statistics alone. Second, the economy is always changing, so explanations of economic behavior that hold in one business cycle may not apply to future ones. And third, as bad as their forecasts have been, the data that economists have to work with isn’t much good either.

two or three dozen major ones that Hatzius says contain most of the economic substance.

Goodhart’s law,

once policy makers begin to target a particular variable, it may begin to lose its value as an economic indicator.

Okun’s law.

1983 and 2006—a

Great Moderation—when

much of the growth was fueled by large increases in government and consumer debt, as well as by ...

H1N1 had been responsible for the worst pandemic in modern history: the Spanish flu of 1918–20, which afflicted a third of humanity and killed 50 million,

This is because AIDS, in its early years, was poorly understood and was highly stigmatized, both among patients and sometimes also among doctors.

In diseases that have no causal mechanism, news events precipitate increased reporting,”

The philosophy of this book is that prediction is as much a means as an end. Prediction serves a very central role in hypothesis testing, for instance, and therefore in all of science.

“All

models are wrong, but some models are useful.”

a model is a tool to help us understand the complexities of the universe, and never a substitute for the universe itself.

the chance that a woman in her forties has breast cancer given that she’s had a positive mammogram is still only about 10 percent.

false positives dominate the equation because very few young women have breast cancer to begin with.

Bayer Laboratories found that they could not replicate about two-thirds of the positive findings claimed in medical journals when they attempted the experiments themselves.

Leonardo Torres y Quevedo

El Ajedrecista

The greenhouse effect was first proposed by the French physicist Joseph Fourier in 1824 and is usually regarded as having been proved by the Irish physicist John Tyndall in 1859,

Water vapor, not CO2, is the largest contributor to the greenhouse effect.

militate

“Men may construe things, after their fashion / Clean from the purpose of the things themselves.”

Whatever range of abilities we have acquired, there will always be tasks sitting right at the edge of them. If we judge ourselves by what is hardest for us, we may take for granted those things that we do easily and routinely.