Re:Nate Silver confuses cause and effect, ends up defending ...
by jacoblyles on Thursday December 20, 2012 @08:39PM
(#4951068)
I disagree that she had reasonable points. I don't see how malice played a significant role at all in the meltdown. Carelessness, bad incentives, and etc. - sure. Maybe a bit of malice. But most of the misallocation of capital was done by firms doing things like trusting AAA rated securities when everybody else was doing the same and it was in their financial interest to do so. Actions like this were not wise, but it's hard to see malice if you're not a card-carrying Marxist.
Re:Nate Silver confuses cause and effect, ends up defending ...
by fatbird on Thursday December 20, 2012 @10:22PM
(#4951340)
She doesn't attribute malice to anyone. She describes the belief that the issue with models in the meltdown was inaccuracy as "maliciously" wrong, which I take to be hyperbole on her part to emphasize the category flaw she sees in this (namely, that if it's just inaccurate models, then better mathematicians are what's needed; in her view, the financial system at the heart of the meltdown was "corrupt and criminally fraudulent", so it's not mathematicians that are needed, and concentrating on them allows criminals to go free).
The fundamental problem she sees is that incentives in the financial industry are not aligned with accurate models, that inaccurate models were deliberately used to further short-term performance at the expense of further inflating the bubble.
"most of the misallocation of capital was done by firms doing things like trusting AAA rated securities"
On this, she links to specific evidence that the "trust" they were exercising was knowingly misplaced because the incentive was always to get the next big bonus.
The naivete of which she accuses Silver is that Silver assumes that the modelers are striving for accuracy in their models (and that they failed to achieve accuracy). With some linked evidence, she asserts that the modelers in the financial industry knew that their models were inaccurate, but that those models supported the corrupt narrative that enriched them, and so perpetuated them. In other words, in the finance world (she says, with some apparent understanding and evidence) the wilfully inaccurate models were a means to a corrupt end.