The National Post in Toronto led off a week of columns on questionable science, leading up to the awarding of the prestigious Rubber Duck Award (named after a Canadian Environmental Defense campaign against homicidal rubber ducks) with a column by Pielke Jr. on models.
RP leads with a discussion of the role of models in the 2008 financial debacle and ends with reflections on hurricanes. He opens with a quote from Keynes.
In 1936, John Maynard Keynes warned that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.” Today, almost 75 years later, the power of economics often manifests itself through sophisticated financial and risk models which — when they are right and when they are wrong — exert a powerful influence on many aspects of our daily lives. Understanding the role of these models and how to use them wisely is something that we are still learning how to do.
Here I have a mild criticism. Surely this would have been an ideal opportunity to cite Keynes’ own sharp commentary on econometric modeling (Keynes, Economic Journal, 1940). Keynes’ article is, of course, conveniently accessible online at CA here and is a commentary that still reads freshly today. I placed it online when we discussed (here) Hendry’s Econometrics – Alchemy or Science, in which Hendry also discussed using cumulative UK rainfall as a predictor (“proxy”) for the Consumer Price Index, a correlation so imposing that is puzzling that it was neglected by Steig et al 2009 and Mann et al 2008.