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Must you bet your views?
A reader asks:
How about some comments on the refusal by Krugman to bet some of his Nobel money against Mankiw?
Put aside Krugman and Mankiw and let's consider the issue in the abstract. Bryan Caplan believes that scholars should be ashamed if they do not publicly bet their views. In contrast I fear this requirement would become a tax upon ideas. How would you feel about an obligation (if only a moral one) for scholars and commentators to publicly reveal the content of their investment portfolios? Those portfolios are their real bets. Yet I still favor the privacy norm and I should note that Bryan never has (nor need he) revealed his portfolio to others at GMU, much less to the broader public.
Let's say that I, as a prolific blogger, express opinions on hundreds of economic policy topics, often involving either explicit or implicit predictions. Then say that hundreds of people wish to bet with me. Can I not simply turn them all down as a matter of policy and practicality?
If you're wondering, I practice "buy and hold and diversify," with no surprises in the portfolio and a conservative ratio of equity purchases. But those investment decisions don't necessarily reflect my views on any given day. I think it is intellectually legitimate (though perhaps not always prudent) to engage in mental accounting and separate those two spheres of my life. I change my mind lots of times, on many economic issues, but does that mean I have to become an active trader? I hope not and I'm not going to.
On long-run economic growth I'm still an optimist, though I am increasingly uncertain as to how much extant firms will capture those gains. On the short run issue at hand, I am fully with Mankiw, and Megan McArdle, in very much doubting the "rosy scenario" emanating from the Obama budget process.
Addendum: Robin responds, Bryan responds.
Posted by Tyler Cowen on March 14, 2009 at 07:35 AM in Economics | Permalink
Comments
Did Mankiw issue rosy scenarios when he was in the Bush administration? Or if Bush did, did Greg break ranks to warn everyone?
You know, some in the right wing blogosphere have been down on Obama for being pessimistic, for 'talking down' the economy. When Obama issues which is for me a fairly conventional Presidential estimate (they are ALL rosy), they turn smartly on their heels to fault him for that. It's crazy. It seems Obama can neither tell us that the economy is in trouble, or that it is recovering.
(Finally, a good "Fooled by Randomness" reader would not get excited by any GDP estimate, because he knows they are all just guesses.)
Posted by: odograph at Mar 14, 2009 8:18:48 AM
You don't have to bet your views as a 50/50 shot.
You also don't have to bet with money - there're plenty of symbolic bets in the sciences, Hawking having a couple running at the moment, for example.
As a professional poker player obviously I'm going to be a lot more in favour of betting one's views, but as long as the amounts can't hurt you, why would it stop you announcing these views?
I make a lot of symbolic bets with my friends who don't gamble quite like me - for example, right now I live in Estonia and often bet my friends here 2 eek - the smallest bill, ~$0.20. You still get to make odds and someone has to hand over money, and those are the important parts of the operation.
Posted by: Andrew at Mar 14, 2009 8:35:53 AM
Also, it seems to me that the blog post here is taking an idea to an extreme that nobody is proposing. Of course you cannot take the time to bet on everything you think. If you spent all your time thinking about your certainty on everything (and thus the odds you'd accept), you'd not think of anything useful any more.
However, in occasional cases of disagreement where both parties spend a lot of time, I don't think it's a problem to bet in issues where there's pride at stake. Obviously in my world, if you do not start to negotiate for a wager in those situations, you must not really believe what you say.
Posted by: Andrew at Mar 14, 2009 8:39:51 AM
Can I not simply turn them all down as a matter of policy and practicality?
You could play it off like every bet's expected payoff is worth less to you than the time it would take to evaluate it, but given the right sized bet (not too small, not too large) and given that you've made a public statement that you think you are more likely to be right than the other person, that position starts to look weak. The correct interpretation of such a refusal to bet is "he must not believe very strongly in his position."
Or I suppose you could claim extreme risk aversion, but that's tough for economists to pull off.
Posted by: Gary at Mar 14, 2009 9:01:55 AM
I'm with the other commenters who think that at least a gentleman's bet is actually required. Maybe not of every scholar in every field, but public intellectuals who vociferously attempt to influence public policy? Damn straight they ought to at least put their pride where their mouth is.
Posted by: Joshua at Mar 14, 2009 9:03:55 AM
The reason academics do not like to bet is because there is an endline and one person will have to admit "I lost" (i.e. "I was wrong"). This is something academics loath. When engaged in scholarly debate via publications, an academic can argue his side ad infinitum. With a bet, however, there is a point where both sides must decide on a victor. Most academics are unwilling to take such a risk.
Posted by: Hume at Mar 14, 2009 9:07:20 AM
A bet is a signal of the strength of your belief. At some times that is a worthwhile signal to send.
Posted by: athelas at Mar 14, 2009 9:25:38 AM
There is already an implicit idea tax in expressing ideas publicly - if you say something foolish, you are opening yourself to criticism and ridicule (and maybe it's worse in the blogosphere because judgment is swift and terrible).
Having said that I think there is a clearly defined dichotomy between publishing something advancing an idea for discussion versus one that is actually going to be used for policy or investment. So, for example, when Christy Romer says the forecasts of GDP growth are such and such, and if they turn out to be too rosy then we are much worse off than if we had not spent the stimulus, then I think we are right to hold her accountable.
Posted by: Robert Bell at Mar 14, 2009 9:39:21 AM
Even considering this idea in the abstract, you have to remember that this isn't a simple disagreement. Krugman titled his post "Roots of evil" and said that Mankiw's views displayed "more than a bit of deliberate obtuseness." If one person, with a decent amount of disposable income, has views that strong, what possible objection could he have to defending them with a small wager? Had Krugman merely expressed his opoinion that Mankiw was wrong, I doubt the wager would have been proposed.
Posted by: Steve Reilly at Mar 14, 2009 9:42:22 AM
OK, I looked up Mankiw's post and he's not willing to make any really precise predictions either. Forget about money, is it too much to expect that academics like Krugman, Mankiw, Barro, Delong, and yes, Tyler Cowen who sound off on the merits of this or that macroeconomic policy approach to the current recession make some actual near term predictions based on the policies actually in place? Five years out is too long, there are too many intervening events and policy changes, but how about a year or two?
Posted by: Phil P at Mar 14, 2009 10:14:24 AM
Yeah. The abstraction here does not seem that useful. No, an academic is not always required to bet. But sometimes he probably is.
To hazard an analogy: Is a man required to "defend his wife's honor"? If that is ALWAYS the case, he would be required to deck the supermarket clerk who says the woman is wrong about the price of potatoes. Which is obviously wrong.
But I think it's true that there are SOME cases in which a man can reasonably be expected to intervene.
To risk another analogy: I think that I can opine about sports without being expected to back said opinions with a bet. But if I walk into a bar, see a guy in a Dallas Cowboys jersey watching a game, and say, "God, your team sucks. Your quarterback sucks. Your receivers suck. They are so obviously going to lose, you must be freaking obtuse to think otherwise. Plus your coach is a liar. Your players are all liars. So much so that I believe that they are probably trying to ruin the entire sport of professional football. It has become so bad and so obvious that they are liars, even their fans are liars. Or stupid."
So maybe the guy with the jersey responds, "Wow. You seem pretty sure of yourself. Care to make a wager?"
The obnoxious guy, I think, would be obliged to accept that wager. Maybe not bet his family's house. But a wager? Yes. Even a dollar. Or a beer. He absolutely must accept.
And for all his brilliance, Krugman is kind of obnoxious. Which is good. Great even. But it does obligate him to take the wager.
Posted by: Sam M at Mar 14, 2009 10:21:47 AM
Can I not simply turn them all down as a matter of policy and practicality?
Quite the opposite. Each offer could plausibly be turned down for reasons other than uncertainty about one's position, but a general unwillingness to consider bets looks very bad. What effect would it have on your writing going forward?
Posted by: Gary at Mar 14, 2009 10:35:10 AM
Also worth noting, the last words of DeLong's post:
"And that is certainly the way to bet."
Well, if it certainly is the way to bet...
Posted by: Sam M at Mar 14, 2009 10:35:44 AM
Tyler, as an avid reader of your blog I am disappointed by your comments. It is fine for scholars, academic or not, to engage in mental accounting, or have opinions that change with time. But what is absolutely unacceptable is to voice these opinions to the uninformed public so as to influence the prevailing climate of opinions.
Think of the moral hazard consequences of what you're advocating - Allow academics, whose opinion many people value and take to heart, to make any unsubstantiated claims they want with no penalty. Reputation effects aside, you can expect more outlandish claims at the margin.
Academics, like other professionals, need to be accountable for what they say in the public sphere. Say whatever you want in peer-reviewed journals but tread carefully when you speak publicly. Making academics - and all public intellectuals - "pay" when they are wrong seems like a good start.
Sure, we'll likely see a leftward shift in the supply curve of ideas but we'll also hear fewer bad ideas.
Just think if businessess, lawyers, doctors, etc did not have to the face the music when doing something clearly wrong to clients...
Posted by: Econometron at Mar 14, 2009 10:54:21 AM
Hasn't Tetlock already proven that experts are bad at predicting things in their field of expertise -- worse on average than reasonably informed laypeople? So why make them lose their money to prove what we already know?
Posted by: salfino at Mar 14, 2009 11:29:56 AM
This is idiotic.
First of all, what do an individual's risk preferences have to do with the validity of their ideas?
Second, how would you ever settle such a bet? Suppose you're a big supporter of fiscal stimulus. In due time the economy recovers. We all can anticipate the arguments:
"The stimulus did it."
"The stimulus didn't matter. The economy would have recovered anyway. It was all a big waste."
And so on.
And if the recession drags on it'll be,
"We needed a bigger stimulus (an argument that many have been making)"
or
"See. It didn't work. You lose."
Even today, how would you settle a bet on whether the Iraq War was worthwhile or not?
Posted by: Bernard Yomtov at Mar 14, 2009 11:32:57 AM
They are not talking about a broad thing like "the stimulus." The discussion is about Obama's assumptions as to the growth rate. His budget assumes it will be X percent. Mankiw says, "No it won't." SO you wait until the year(s) in question and see if the administration's assumptions held.
Posted by: Sam M at Mar 14, 2009 11:41:03 AM
Look at the way Krugman and DeLong go on and on about the "moral bankruptcy" of Republican economists - that in fact not only does Mankiw know the truth about the efficacy of tax versus fiscal multipliers, he and other bad men are pulling the wool over the public's eyes in a cynical move to save the imploding GOP from their righteous demise.
Tyler, one could call these vicious and personal attacks on economists unwilling to embrace the government-as-a-panacea orthodoxy pervasive in our public fora an implicit tax on good ideas. Shocking, that.
For a long time Krugman has paid little public cost for his many untruthful claims. He recently tarred Arnold Kling in his NYT editorial as a racist, for example, offering no apology even after Kling produced fortuitous and conclusive evidence in his favor. At the same, from time to time, Prof. Krugman generally has interesting and and constructive thoughts to add to the discussion. So I suggest we elevate the level of his commentary by raising the cost of his dubious Phillipics in the most magnanimous way possible - by aggressively evaluating and publicizing his ex-ante predictions in the way a token bet easily achieves. Indeed, it would make informed commentary and Krugman himself the better for it.
Posted by: Billare at Mar 14, 2009 11:48:01 AM
Hey, Billare, care to bet that Krugman tarred Kling as a racist? Here's the column in question. http://www.nytimes.com/2009/02/13/opinion/13krugman.html
Posted by: Steve Reilly at Mar 14, 2009 12:15:31 PM
It is interesting that the same kind of liberal who will wax so rhapsodic about the implicit "coding" on Ronald Reagan's speeches and the "Southern Strategy" when given the chance would choose to be parsimonious about Krugman's baldness here.
"And the rhetorical response of conservatives to the stimulus plan — which will, it’s worth bearing in mind, cost substantially less than either the Bush administration’s $2 trillion in tax cuts or the $1 trillion and counting spent in Iraq — has bordered on the deranged.
It’s “generational theft,” said Senator John McCain, just a few days after voting for tax cuts that would, over the next decade, have cost about four times as much.
It’s “destroying my daughters’ future. It is like sitting there watching my house ransacked by a gang of thugs,” said Arnold Kling of the Cato Institute.
And the ugliness of the political debate matters because it raises doubts about the Obama administration’s ability to come back for more if, as seems likely, the stimulus bill proves inadequate."
Everyone understands what "ugliness" is short for in the NYT lexicon, especially since it's not appropriate to use such a term nowadays to refer to genuinely ugly people.
Posted by: Billare at Mar 14, 2009 12:31:21 PM
Just to throw in a mild monkey wrench here, but it happens to be the case that some branches
of various some great world religions consider gambling to be a sin. Hence, there is at least
the possibiliity of being at least vaguely morally repelled by the whole practice.
I am one of those loud-mouthed academics who shoots off his mouth in blogs, although I generally
avoid making very specific forecasts of the sort that are particularly bettable, such as "The
Dow will be above 10,000 by the end of 2010!" I am all too aware of Keynesian uncertainty and
I have a sort of irrational feeling that if I bet on something, that very act will somehow make
it not come about, even if it looked reasonable at the time I made the bet.
But, more generally I just find myself getting really turned off when somebody pulls this old
"you wanna bet on it?" line. It seems like a) a kind of half-baked macho exercise, and b) a way
of actually avoiding discussing the issue in question ("to heck with all this talk, put your money
on the table!"), not to mention that I have better things to do with my money.
I recognize that there is a certain pro-betting attiude in the famous Mason lunch crowd. It is
not just Bryan Caplan, whose views are well known on the matter, but I think Robin Hanson probably
adds to it, given his faith in prediction markets. I grant these often do well, and have even published
some papers showing this (in the journal I edit, JEBO, not by me, but by others, including Robin).
However, I also know there are some cases where they do horribly, with the ones for who is to get
the Nobel Prize in economics each year being a prime example.
One pair of academics who did bet publicly were Julian Simon and Paul Ehrlich, who bet in 1980 over
whether the prices of a set of commodities would be higher or lower in 1990. It was public and non-
trivial, $10,000. Simon's bet on lower prices won, and Ehrlich paid up. I have no problem with others
engaging in betting if they want to (although I think people who go to Las Vegas or anywhere else to
bet in setups with negative expected returns are just fools, and many of them truly pathetic ones), but
I just simply do not like and never have done it even in the zero sum game setups (although I have played
poker sometimes, a different matter somehow, a game of skill after all), not on sports, not politics, not
on economics, although I will not claim the morality argument itself. More just some kind of gut reaction.
Don't wanna and you can't make me.
Posted by: Barkley Rosser at Mar 14, 2009 12:45:01 PM
@Tyler
Please don't take this the wrong way. I don't mean to go all John Stewart on you here. Forgive my candor, it's meant to be fair, but also merciful.
I pity you now. I am filled with compassion for the untenable situation your lack of truthfulness and your position as a paid ideologue has placed you.
"Then say that hundreds of people wish to bet with me. Can I not simply turn them all down as a matter of policy and practicality?"
No. It shows you are insincere, and just another Beltway paid talking head, another ideologue. You have sold your dignity and are not truth-seeking.
While of course you should change your mind and update your beliefs, your unwillingness to stand behind what you say is tragic. You know how easy it is to open a play-money prediction market - that removes any reasonable objection of policy and practicality.
"to engage in mental accounting and separate those two spheres of my life"
This kind of convenient compartmentalization is - there is no other way to say it - neurotic and shows an inauthentic state of being - it speaks powerfully to a lack of ethical disposition.
You are a teacher! Do you feel no responsibility? Do you think your job as a professor is just to shove facts at paying customers who seek a status signal?
Even cynics believe actions should be noble. That's why they go to the trouble of living publicly in barrels - as form of protest against hypocrisy. You need not go so far, but you should at least open a market.
Posted by: appalled at Mar 14, 2009 1:06:14 PM
"Let's say that I, as a prolific blogger, express opinions on hundreds of economic policy topics, often involving either explicit or implicit predictions. Then say that hundreds of people wish to bet with me. Can I not simply turn them all down?"
It wasn't quite like that. It went like this: Krugman accused Makiw that he knows that Krugman is right, but he refuses to say so because he is a Bushie, and of course Bushies lie, steal, and are pure evil. If you are Mankiw, waiting to see if the facts refute Krugman is a lose-lose situation. If they do not, Krugman gloats that he was right and you of course knew that. If they do show Krugman is wrong, he could still say that at the time everyone who was not an evil Bushie believed that he was right. The only way for Mankiw to show that he did not believe Krugman is right at time t zero is to propose a bet, because, presumably not even evil, stupid Bushies would bet that the water is not wet. Once Mankiw does that, what Krugman does is irrelevant: if he takes the bet, he proves that he truly believes what he writes, as stupid and absurd that may be. He did not take the bet, showing that not even Krugman takes what Krugman writes seriously.
Posted by: Bushequalhitler at Mar 14, 2009 1:38:25 PM
Mankiw is asking for a bet that rewards him when times are worst. He should pay a premium for the favorable negative correlation with the market, since he could easily hedge his bet with an index fund.
Posted by: Ryan at Mar 14, 2009 2:14:01 PM
Phil P,
Mankiw made the bet parameters quite specific:
Team Obama says that real GDP in 2013 will be 15.6 percent above real GDP in 2008. (That number comes from compounding their predicted growth rates for these five years.) So, Paul, are you willing to wager that the economy will meet or exceed this benchmark?
Considering the language that Krugman used, he would take a gentlemen's wager if he had any backbone whatsoever. Hume, above, explained the refusal- Krugman refuses to put himself in a position where he might have to admit he was wrong.
Posted by: Yancey Ward at Mar 14, 2009 2:24:19 PM
