The Gold Standard | Kahneman and disbelief

I had written my MINT column today inspired by the four-part piece by Daniel Kahneman in Bloomberg. You can find them here. BTW, I do find a good source of information, data, charts and opinions, notwithstanding what Matt Taibbi, in his inimitable style, had to say about Mayor Bloomberg. It is hard not to enjoy reading Matt Taibbi. This one is indeed colourful and hard to refute. I am digressing.

In fact, Emanuel Derman refers to Professor Kahneman’s book in one of his recent blogs. Further, in case you had not read Derman’s blog post on ‘Pragmamorphism’, you have missed something. It is dripping with wisdom and philosophy. Goes beyond finance, economics and asset prices. Just a sample:

I want to conclude by quoting from a wise as well as brilliant nonpragmamorphic physicist, Schrödinger, the father of the quantum mechanical wave equation that bears his name. He knew that the apparent solidity of matter disguises the mystery that lies beneath. In 1944, summarized his personal views, he wrote:

My body functions as a pure mechanism according the Laws of Nature. Yet I know, by incontrovertible direct experience, that I am directing its motions … in which case I feel and take full responsibility for them.

Schrödinger didn’t shy away from the essential duality: the apparent conflict between scientists’ ability to discover nature’s mechanical laws and the autonomy that must nevertheless lie beneath any attempt to discover them. He concluded:

Every conscious mind that has ever said or felt ‘I’ … (is) the person, if any, who controls the ‘motion of the atoms’ according to the Laws of Nature.

The world is complex and you lose a lot by insisting that the things you don’t understand already fit into the boxes you imagine you do. Don’t be pragmamorphic.

After I had sent the piece off to MINT on Monday morning, I received a mail from my good friend Sushant.It is a blog post by Arnold Kling. The post is small and is worth reproducing here in full:

Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.That is from Daniel Kahneman, Thinking Fast and Slow, p. 201. The chapter is called “The illusion of understanding.”

I am toying with the following formulation for explaining the significance of ignorance: the policy wonk’s perspective is that he can see everything clearly, from the big picture to the little details; my perspective is that I am groping blindly through a world that is too complex for me to understand.

Also, I am in the process of re-reading the Converse issue of Critical Review, which I first blogged about five years ago. In Jeffrey Friedman’s essay, he raises the issue of how Rush Limbaugh and Paul Krugman could each be sure that he is right.

I think one can model this metaphorically as the outcome of a hill-climbing algorithm where you can get stuck at a local maximum. I will explain this below the fold.

A hill-climbing algorithm is a way to solve for the maximum of a function. Imagine that you were plopped down in the middle of some topographically varied terrain and were trying to find the highest mountain peak. Using a hill-climbing algorithm, you would send out small probes in all directions and move in the direction where altitude is increasing. Then repeat, until you get to a point where altitude is declining in every direction.

If there is only one peak in the terrain, this method will find it. But if there are many hills, it is also possible to get stuck at the top of a small hill and never find the peak of the highest mountain.

Think of Limbaugh and Krugman as being stuck on their own hills. Based on where they started, and the paths that their experiences took them, each is at a point where he cannot see any way to improve his understanding of the world by changing his mind. Even though their views are incompatible.

The way to improve a hill-climbing algorithm is to send out distant probes as well as nearby probes. I am not sure how to apply that in this context. Yes, “try to understand the other person’s point of view” is a help. But I don’t think it does the job. (The link to the post is here)

This is an apt illustration of ‘theory induced blindness’. As Arnold Kling says, I too would use the quote very often. That is a gem.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.