Friday, September 21, 2007

Statistical detectives, including economists, are changing the world

The New York Times had a review of the book Super Crunchers: Why Thinking-by-Numbers Is the New Way to Be Smart by Ian Ayres. The basic idea is that if you do it right, it is better to make decisions based on using numbers than your feelings or expertise or experience.

Here is a brief exerpt:

"What is it about math that can make people so angry? In the late 1980s, a wine lover named Orley Ashenfelter began publishing a newsletter called Liquid Assets that predicted how good each Bordeaux vintage would turn out to be. Instead of basing his judgments on the taste or smell of the wine in its early stages, Ashenfelter, an economist at Princeton, preferred data. He had come to believe that the weather during a growing season in Bordeaux was a remarkably accurate predictor of the eventual price of the wine. A hot, dry year seemed to make for great Bordeaux.

As you might expect, wine critics didn’t take very kindly to the professor’s ideas. A British wine magazine denounced their “self-evident silliness.” Robert Parker called Ashenfelter “an absolute total sham.” Eventually, Wine Spectator stopped accepting advertisements for newsletters, apparently because of Liquid Assets.

Ayres’s point is that human beings put far too much faith in their intuition and would often be better off listening to the numbers. Ashenfelter, using data, predicted that the 1986 Bordeaux vintage would be ordinary, while Parker, relying on expertise, said it would be exceptional. Ashenfelter was right."

Click here to read the reivew. You might have to register and allow cookies to read it.

4 comments:

Carl said...

This looks like and interesting book and I assume very similar to the theories in Freakonomics. I have added his book to my Amazon list for future reading. Did you see his theories on Sports (baseball and NFL)? When are you going to write your book on the topic of statistics?

It is so important……..the statistics classes I have had in college are treated as if they are just one more math class that you have get through to get a degree, instead of the interesting and required business tool that statistics has become.

Cyril Morong said...

Carl

Thanks for dropping by again. I don't when I will write a book. For now, I am going to continue writing articles on baseball statistics. See my sabermetrics page in my list of links for that. I have not seen Ayres' theories on sports.

I am sorry that your stats classes are not what you had hoped for. I taught stats for business in economics and tried to keep it relevant.

Cyril Morong said...

You might find the following interesting.

Clinical and Actuarial Judgment Compared

Carl said...

Thanks for the article, interesting, with a good list of additional reading and links.