How do you make a good prediction?

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<ul><li><p>For more books and arts coverage and to add your comments, visit</p><p>29 September 2012 | NewScientist | 49</p><p>I predict a riotPlay it safe with prediction in economics but not in science, says David Walker</p><p>The Signal and the Noise: Why so many predictions fail but some dont by Nate Silver, Penguin, $27.95</p><p>THE pretensions of economics as a science have taken a mighty knock since the financial crisis of 2008. Most economists blithely ignore this </p><p>great global experiment, and have so far resisted revising their underlying theory. </p><p>Yet the financial crisis has engrossed others, among them psychologists and even some philosophers of science. It is the last group, to some extent, that Nate Silver aspires to join in writing The Signal and the Noise. </p><p>He starts by discrediting the efficient market hypothesis, the notion that a market price (of a share, for example) is rational and true because it necessarily reflects the sum of available knowledge. Its great for modelling equilibrium, but panic </p><p>and herd instinct prevail when the balance tips, resulting in deep, long-lasting busts. </p><p>But if Silvers book was provoked by the hubris of model-builders who predicted everlasting stability, it evolves into something deeper and wider: a meditation on uncertainty, probability and humility. When the data and theories dont </p><p>permit predictions, he argues, we should hold back, no matter how big the media clamour or corporate inducements.</p><p>Silver uses examples taken from his day job crunching electoral data (see page 24) and his sideline in quantitative analysis of baseball two fields where modest predictability works OK. A former professional poker player, he races through a witty personal account of the odds of holding a winning hand. </p><p>The examples are vivid, though readers are sprayed with extraneous detail. To convince us that he talked to his interviewees, Silver tells us that one of them (a professional sports gambler) </p><p>has five flat-screen Samsung TVs on his wall; another (Donald Rumsfeld, US defence secretary during the Iraq war) is recounted to be precisely five foot seven inches tall.</p><p>Underneath, Silver is struggling to say something profound, but he cant quite decide what. Meteorologists can save lives </p><p>by predicting the course of hurricanes, but geologists cant do the same with earthquakes. Does he lament this as a deficiency, or should we celebrate the limits of predictive science? </p><p>A couple of chapters shiver on the edge of deep philosophical waters. Do we even need past observations of data to make probabilistic predictions, he wonders. He seems to favour inductive reasoning but does not say what the knowledge built on such foundations would look like. If his message is bow in awe at prevalent uncertainty, wouldnt it discourage science, especially the classic Einstein or Higgs kind, where the gap between theory and empirical corroboration can be decades long? n</p><p> David Walkers most recent book is Dogma and Disarray, co-authored with Polly Toynbee (Granta, 2012)</p><p>Hurricanes are hard to predict, economic crises near impossible</p><p>Altruism of affluenceAn Ecology of Happiness by Eric Lambin, University of Chicago Press, 17/$26</p><p>Reviewed by Michael Bond</p><p>IT CAN be very difficult to sell environmentalism, because to the prosperous the benefits often seem far off. In An Ecology of </p><p>Happiness, geographer Eric Lambin tries to bring them closer to home by articulating how the natural world is essential to everybodys well-being. The best motivation is, he argues, to demonstrate that our health, happiness and security depend on reducing our ecological footprint.</p><p>He conjures up a creative array of examples to back this up, some of which work better than others. At one extreme, he shows how environmental disruption from climate change, deforestation and </p><p>increased human mobility has been directly responsible for the emergence of new diseases such as Ebola and bird flu. At the other, he talks up the health advantages of owning pets and controversially asserts that urban life necessarily has negative psychological consequences since it is foreign to our long history of a natural existence.</p><p>The problem as Lambin acknowledges is that the most disruptive ecological changes are felt most keenly by those least </p><p>able to adapt. You dont need to persuade a Kenyan cattle herder that improving the environment would increase their well-being. The challenge is how to encourage altruistic behaviour among the affluent: to persuade them to eat less meat, or accept higher taxes on air travel, for example. It still comes down to an appeal to moral reason, a choice between individual happiness regardless of the cost for others and a sense of responsibility towards the long-term interests of humanity. n</p><p>BUrT</p><p>oN</p><p> MCN</p><p>EELy</p><p>/GET</p><p>Ty</p><p>When the data and theories dont permit predictions, we should hold back</p><p>120929_Op_Books List etc.indd 49 21/9/12 17:28:24</p></li></ul>