Sunday, September 4, 2011

Cassandra in reverse?

Via Paul Krugman, the Wall Street Journal has not had teh best record of predictions:

Think about it (no time for full links); by reading that section you could have learned, either from the editorial page proper or from the paper’s favorite op-ed guys, that

Clinton’s tax hike would cause a recession and send stocks plunging

Dow 36,000!

American households are saving plenty thanks to capital gains on their houses

Interest rates will soar thanks to Obama’s deficits

And much, much more.

What’s remarkable is that the Journal does not seem to pay a price for this record of awesome wrongness. Maybe subscribers buy the paper for the reporting (although if you ask me, that’s been going downhill since the Murdoch takeover). But as far as I can tell, lots of people still take the editorial page’s pronouncements seriously, even though it seems likely that you could have made a lot of money by betting against whatever that page predicts.

That really does point to an oddity in human culture. Being wrong does not seem to impact on the authority of the source, at least in some groups. That is an unfortunate property as incorrect predictions should make us rethink our internal models rather than reinforce them.

There are complexities here (everyone will have at least some sort of hit rate as even bad predictions are right every once in a while). But it does seem odd that we often double down on bad ideas.

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