Free Markets, Free People

We should pay less attention to "results" produced by computer models

That’s the basic message our friend Warren Meyers (of Coyote Blog and now Forbes) makes in an article. His points are not only good, but valid. And if one thinks about how inaccurate the models we’ve seen drive debate and spending are, we’d insist on better data before those decisions are made.

Meyer points out that there are few, if any CEOs in non-financial firms who would invest  a penny based solely on computer models. Yet we have this propensity to place much more confidence in models that have done nothing to earn that confidence than they deserve.

For instance:

Last week the Council of Economic Advisors (CEA) released its congressionally commissioned study on the effects of the 2009 stimulus. The panel concluded that the stimulus had created as many as 3.6 million jobs, an odd result given the economy as a whole actually lost something like 1.5 million jobs in the same period. To reach its conclusions, the panel ran a series of complex macroeconomic models to estimate economic growth assuming the stimulus had not been passed. Their results showed employment falling by over 5 million jobs in this hypothetical scenario, an eyebrow-raising result that is impossible to verify with actual observations.

Not only is it impossible to verify, it was issued as a defacto “truth” and the “stimulus” was declared a “success”.  And don’t forget the inclusion, now, of one of the world’s best weasle words to pad the results – jobs “saved”.  However the administration goes to great lengths to ignore its previous claim that if the “stimulus” was passed, unemployment wouldn’t rise above 8%. One has to guess, given the results, that the computer model was wrong about that.

Meyer goes on to point out how the modeling which can’t predict the complex world of economics, is somehow considered the “gold-standard” of predictability when it comes to the exponentially more complex climate.  So much so that governments everywhere are basing trillions of dollars of taxes (cap-and-trade) on the results of such models in an supposed effort to “save the planet”.

While we have been bombarded with hockey sticks and forlorn polar bears, our focus in climate should really be on the computer models. The primary scientific case for man-made CO2 as the main driver of global temperatures is made in exactly the same way that the stimulus was determined to have created 3.6 million jobs: computer modeling. No one yet has been clever enough to structure a controlled experiment to isolate the effect of rising CO2 levels from other changing variables in the complex global climate. So, just like the CEA did in scoring the stimulus, climate scientists use computer models to run virtual experiments, running the models backward over the last century with varying assumptions for CO2 levels.

This modeling approach yields amazingly circular logic. Like macroeconomic models built by devoted Keynesians, climate models are constructed by academics who passionately believe that a single variable, CO2 concentration, is the dominant driver of the whole complex climate system. When run retrospectively, the models they create unsurprisingly give the result that past temperature increases are mainly attributable to CO2. The problem with these models is that when run forward, as in the case of the Washington Redskins election model, they do a terrible job of predicting the future. None of them, for example, predicted the flattening of global temperatures over the last decade.

Yet policy has been proposed and written based on results that are nonverifiable and questionable at best.  That’s insanity.  But the purported case for using the results is if we wait for real data it may be too late.  But when the real data appears (such as the flattening of global temps for this past decade) the modelers and proponents of the government action want to ignore it and deny its importance.

This all goes back to two themes I’ve been hammering for quite some time – common sense and scientific skepticism.  Both are necessary tools of a rational person.  And Meyers nails the point:

Our common sense about government stimulus tells us that the government is highly unlikely to invest money more productively than the private entities from whom the government took the money. Unfortunately, we have allowed this common sense to be trumped by computer models. Once our imperfect understanding the economy was laundered through computer models and presented with two-decimal precision, smart people somehow lost their skepticism.

We are now facing what is potentially an even more expensive decision: to regulate CO2 based mainly on computer models that claim to be able to separate the effects of trace concentrations of CO2 from a hundred other major climate variables. If your common sense is whispering to you that this seems crazy, listen to it. Otherwise all we get is garbage in, money out.

The “garbage in” should be obvious. Unfortunately, the “money out” is money coming out of your wallet to pay for unproven science and unfounded economic models. 

~McQ

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18 Responses to We should pay less attention to "results" produced by computer models

  • I never understood why people trust complex models when those who create them cannot definitively explain the effect of several key variables. To the best of my knowledge, climate scientists are uncertain of the effect of cloud cover on global temperature. Economists are divided on the exact size of the multipliers of government spending and taxes. Models are simply theories and the best way to measure the validity of theories is to see how well they predict future events. Otherwise, all we have is an indecipherable soup of equations whose only purpose is to conceal the creator’s unproven assumptions.

  • I worked at an econometric modeling / forecasting firm in the 80’s … the key to all results were little things called “add factors” and “mul-factors” (simply add / subtract from the model result, or adjust by a percentage) buried in the models which allowed the forecasts to be whatever the economist wanted them to be.  Oddly or not, the adjusted models made sense while the raw models produced a hash.

  • Witch doctor talismans.

    Casting the bones.

    A splinter from the True Cross.

    The secret ingredient.

    Computer models.

    These are all the same thing, merely changed a bit to suit the tastes and sensibilities of the con artist’s mark.

    It’s funny that the same “intellectuals” who would sneer at anybody stupid enough to believe in witch doctors, oracles, snake oil, etc., will trip over themselves to believe in computer models.

  • Warren Meyer is a treasure of information and reason.  I’ve been reading him for years and I was happy for him that he got picked up by Forbes.
    He admits he’s a layman, but his articles and presentations on Catastrophic Anthropogenic Global Warming (CAGW) pose some difficult question for the closed-minded, anti-Science gang which is trying to frighten the public in often oafishly inept ways.  Warren is the kid that says, “The emperor has no clothes.”
    He doesn’t claim there’s no warming.  He doesn’t claim that humans haven’t contributed to it.  But he injects reason and skepticism into the debate, challenging the people who want to sit on their lecterns and declare their conclusions to be “undeniable”, “settled science”, and sacred to the point that even the most pertinent questions are derided as the ulterior schemes of “deniers” (who are on the level of Holocaust deniers).
    The very fact that Scott Erb, (Mr. “left-libertarian” who claims to oppose big, central government, but who stands with the big, central government proponents 100% of the time), has thrown his lot in with the alarmists is a very good reason for any person familiar with his long history of dis ingenuousness to take another look, if he/she hasn’t already.
    Don’t take Meyer’s word on faith, just because he happens to have similar political approaches as you.  Question him.  His websites are there.  Challenge him.  Ask him for more information.
    I’d love to see Erb in the comment section there, going toe-to-toe with Warren and his readers.

    • Erb rarely provides any real argument or facts, just groundless claims. In fact, the only real argument I’ve seen him provide is on foreign policy stuff, mostly the Iraq war. When it comes to stuff like AGW, he has no real argument, just baseless claims.

      • On CAGW, he’s just following the herd.  They’ve had a whole generation or more to brainwash  in government schools, lots of Hollywood movies (like the spectacularly anti-scientific film “Day After Tomorrow“, footage of which Al Gore used in his own movie, or the self-loathing “Day the Earth Stood Still” of 2008 in which aliens come to exterminate human beings for failing to be “green”), plenty of media hype (check out this one), and they still can’t convince a majority of the population.  Propagandists like Erb complain that “big business” (he doesn’t specify which) spend lots of money (he doesn’t specify how much) to spread contrary information.  But somehow the billions of taxpayer dollars spent on research grants, politicized “experts” for the IPCC, and would-be carbon carpetbaggers itching to profit off of carbon markets are all acceptable.  Businesses, who will suffer from these centralized, Big Government impositions, are supposed to sit quietly and just take it.

  • It’s odd that they are reporting this at all …

    Reporting from Washington — As Democrats fan out across the country to campaign for reelection this month, many are surprisingly quiet about their hard-won accomplishments — the major bills they have passed under President Obama.
    In an effort coordinated with the White House, congressional leaders are urging Democrats to focus less on bragging about what they have done — a landmark healthcare law, a sweeping overhaul of Wall Street regulation and other far-reaching policy changes — and more on efforts to fix the economy and on the perils of Republican control of Congress.

  • Garbage in…garbage out.
    Even rather simple models can have results queered by one wrong variable.

  • I’ll also note that when you have BIG GOVERNMENT with power to hose an entire economy + “scientific” religion as dogmatic as any in history + very interested people like OwlGore making enormous $$$ + computer models that predict weather (or climate) 100 years from now (when we can’t reliably predict the next 10 days)…
    you have a formula for ruin.

    • It’s not hard to understand that global warming/climate change is a purely political issue for the left.  After years of telling us that we were driving the planet towards a tipping point (a critical juncture at which we would reach a point of no return, at which any action taken to save the planet would be too late) the nations of the world got hung up on dollar amounts and fiscal sacrifices.  If we really were trying to stave off a disaster that threatened to end all life on the planet, of what use would it be to quibble over dollar amounts?  Heck, the US delegation went to Copenhagen promising hundreds of billions of dollars in order to reach a deal, and found no takers.
       
      Meyers makes an apt comparison.  In the same way that economic models and forecasts are carefully shaped to provide specific output in order to support legislation, so are many of the climate models and forecasts being used to create a specific result that will drive legislative efforts.

      • Plus, you have an interesting cycle formed between quasi-scientific interests and and the scientific idiots in government.  They support each other in both obvious and subtle ways.  It would be sort of fascinating if it did not threaten to destroy our culture…kind of like Islamists.
        I need to write a piece about “The Environmental Dog Who Did Not Bark In The Gulf”.  I think it shows just how collusive the relationship is between environmental groups and the Collectivists in government that Obama totally walked on his Gulf strategy.

      • Meyer has plenty of experience dealing with government.  His company provides private management for federal park facilities (as a better option than shutting them down) in dozens of states, so he’s dealt with the endless red tape and inane bureaucratic red tape for years.  Rather than some theoretician, he’s had his boots on the ground, in the muck for a long while.  Nor is he a knee-jerk Republican (he compares the two-party system to Coke and Pepsi, an analogy I’ve copied on a number of occasions).  He’s a vocal critic of his Sheriff’s department (Maricopa, AZ, run by the corrupt Joe Arpaio) and the anti-immigration legislation recently passed.
        He’s provided some detailed analysis of the cost of Health Care Deform to employers, of light rail projects, of “green” energy sources, the mortgage crises, and a number of other topical issues.  Even if you don’t agree with him, it’s always well worth your while to read what he writes and to follow his links to find out more information.

  • Simple enough – take the known climate data from 1900 forward to 1930 and project 1940’s, etc, etc etc.
    Can’t get the model to reproduce the same result as historical reality without some tweaking?  and that happens every time you try to go forward to the next prediction set?  heh….you figure out what that means.
     
    That really isn’t rocket science.    I remember as a kid in Trig, I used to come up with all kinds of cockamamie methods for deriving the same results of an equation that the teacher had – and it worked for THOSE numbers for THAT problem.  Irritation was, it never worked like his did when we applied new numbers.  Go figure, I could have been a climate modeler!

    • Dude, you found your niche…!!!  AND the money’s good…status is a killer…lots of ditzy chicks ALLL over your “second chakra”.

  • i’m still waiting on politicians to try and used computer models to replace elections.

  • Thanks for this. I have been doing financial models (teaching and using) for over 15 years. My first premise which I learned from someone smarter than I is that your model is never right. A model is an abstract. No matter how good you think you are, reality has a funny way of changing the results. I found the best model is experience. The most common mistake is ASSUMING (in banking) that if you raise rates they will come. You have to raise them a certain level above market to get them to come and guess what, as soon as that premium is gone so are they. So you could get a bang in the short run but you always end up back to where you started.

    This is how I came to my conclusions on AGW. As soon as I saw they used models to predict how the stimulus worked I started laughing. Let me have at it, I could make it say it saved a gazillion jobs and have more data to back it up. Who knows maybe Biden will quote this post as evidence that the stimulus worked. When I model I have markers that tell me wether or not my predictions are working. What were the markers for this? I have had cases were the bottom line improved but it had nothing to do with what we did, it was just the result of the market demand on the balance sheet.

    Not all good results (I am not saying the stimulus was a good result) come from good decisions. To assume what the market would have lost in jobs is ridculous. Based on what? I beleive the market has a bottom point for employment, and we are at it. We need this amount of jobs just to keep the wheels spinning. You better show me some good evidence of why you think it would be lower. Sometimes the simplist questions are the best, if these can’t be answered the theory should be dead.