Monday, February 24, 2014

Bright people and foolish statements OR the wisdom of crowds

What a clanger. From The Mobility Myth by James Surowiecki. I have read one of Surowiecki's books (The Wisdom of Crowds) and it was alright. Not a tight argument, but adequate. But Surowiecki is alarmed by income inequality and low income mobility, the topical feel good issue about which everyone has a self-serving opinion and only a mite understand anything about which they are talking.

Lamenting recent research showing that intergenerational income mobility has been lower than we might have thought, Surowiecki observes that
The middle class isn’t all that mobile, either: only twenty per cent of people born into the middle quintile ever make it into the top one.
If you believe that people's actions contribute to their outcomes, then you wouldn't be especially surprised that there might be unequal outcomes across the quintiles. However, if you believe that life outcome's are not the product of individual efforts but are essentially random, then how many people would you expect from the middle income quintile to end up in the top quintile? Well, twenty percent.

What is the argument being made and what evidence is relevant to that argument? So many laid so low so often over those fundamental issues. Daniel W. Drezner has some interesting observations about how bright, accomplished people can so often grasp the wrong end of the stick in his article, What Nick Kristof Doesn't Get About the Ivory Tower. He observes:
But when it comes to my little patch of academe, international relations, I think Kristof has it mostly wrong. And I think I’m in a unique position to shed some light on why the three tribes that dominate the discussion of foreign affairs—academics, Beltway types and money folks—don’t always get along.
He elaborates that each of the three tribes has distinct strengths not found among the others but also that there are distinct weaknesses. His conclusion is, ironically, not far from that of Surowiecki in The Wisdom of Crowds, that it is not crowds that generate good decisions but rather a distinct configuration of crowds. In order to get to a good decision, you have to have multiple parties present and participating who bring a variety of domains of deep knowledge to the discussion. That variety and depth together is what increases the odds that you will avoid the blind spots that are all too prevalent in any single domain of knowledge.

It is not crowds per se that improve decision making, it is the statistical probability that a populous crowd will happen to have the range of nodes of deep knowledge interacting together which produces the better outcome.

Like avoiding statistical clangers such as middle income quintile people only have a twenty percent chance of ending up in the top income quintile.

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