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Sunday, September 16, 2007

"Relying on Cold, Hard Numbers"

David Leonhardt reviews "Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart," by Ian Ayres:.

Let’s Go to the Stats, by David Leonhardt, NY Times: ...In the late 1980s, ... Orley Ashenfelter began publishing a newsletter called Liquid Assets that predicted how good each Bordeaux vintage would turn out to be. Instead of basing his judgments on the taste or smell of the wine in its early stages, Ashenfelter, an economist at Princeton, preferred data. He had come to believe that the weather during a growing season in Bordeaux was a remarkably accurate predictor of the eventual price of the wine. A hot, dry year seemed to make for great Bordeaux.

As you might expect, wine critics didn’t take very kindly to the professor’s ideas. A British wine magazine denounced their “self-evident silliness.” Robert Parker called Ashenfelter “an absolute total sham.” ...

In field after field, there have been versions of the Ashenfelter story. Michael Lewis wrote a best-selling book, “Moneyball,” about how Billy Beane, the general manager of the Oakland Athletics, had succeeded despite a relatively meager payroll, largely by giving more weight to statistical analysis than to intuitive judgments about players’ abilities. Ever since its publication, old-time baseball commentators have been slipping anti-Beane cracks into broadcasts and newspaper columns. More tragically, the 19th-century Austrian doctor Ignaz Semmelweis was ridiculed and ignored by his fellow physicians after collecting evidence that the lives of many mothers could be saved if only doctors and nurses washed their hands before a baby’s delivery.

Today, Semmelweis is a hero. To Ian Ayres, ... the author of “Super Crunchers,” he is also a forefather of a modern movement of statistical detectives who are changing the world. “We are in a historic moment of horse-versus-locomotive competition,” Ayres writes, “where intuitive and experiential expertise is losing out time and time again to number crunching.” ...

For all its successes, though, statistical analysis continues to face tremendous skepticism and even animosity. For one thing, Ayres notes, statistics threaten the “informational monopoly” of experts in various fields. But even to many people without a vested interest, relying on cold, hard numbers rather than human instinct seems soulless. ...

Ayres’s point is that human beings put far too much faith in their intuition and would often be better off listening to the numbers. Ashenfelter, using data, predicted that the 1986 Bordeaux vintage would be ordinary, while Parker, relying on expertise, said it would be exceptional. Ashenfelter was right.

The best stories in the book are about Ayres and other economists he knows, whether they are studying wine, the Supreme Court or jobless benefits. He’s less convincing when he writes about doctors advocating “evidence-based medicine,” Hollywood executives who use “neural networks” to predict box-office receipts, or almost anyone else outside a university. ...

Ayres is simply too optimistic about the impact data analysis is having. “Super Crunching approaches are winning the day and driving out intuition and experience-based expertise,” he writes. But that’s not quite right. Evidence-based medical treatment, to take one of his favorite examples, is still far from the norm in this country. The Super Crunchers, aided by the explosion of inexpensive computing power, do their job remarkably well. The next step is finding some Super Persuaders.

    Posted by on Sunday, September 16, 2007 at 02:25 AM in Economics | Permalink  TrackBack (0)  Comments (25)

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