By Arnold Kling
At the conference where I gave my talk that mentioned recipes and ingredients, I met Edgar Capen, co-author of a classic paper that coined the term “winner’s curse” for auctions.
His main theme is that people under-estimate uncertainty. If someone says, “the chance of X falling between A and B is 90 percent,” the true probability is likely to be 30 percent. He likes to do experiments where he puts a large number of beads in a jar and asks people to guess the number of beads. One point he makes is that the “wisdom of crowds” result (that the average estimate tends to be pretty good) often depends on keeping outlier estimates in the sample. It is the extreme contrarianism of one person in the crowd that keeps the crowd’s estimate from going off track. I wonder if anyone has compared median estimates with mean estimates in “wisdom of crowd” studies.
He said that some of his results on overconfidence are in a 1976 paper in the Journal of Petroleum Technology. He shares my strong skepticism about climate modeling.
UPDATE: Bryan refers to Robin Hanson’s post on skeptics who won’t bet on their skepticism. I have two reactions.
1. I probably would be willing to buy puts and calls on future global temperature relative to the consensus forecast. I think that the consensus is a classic case of a subjective confidence interval that is overstated relative to reality.
2. A slightly harder task is to formulate betting markets on climate models, which is where my skepticism really is strong. Off hand, I can’t come up with a way to bet on the accuracy of model parameters, as opposed to just betting on future temperature.