The Illusion of Knowledge

Economists aren’t unique in this regard. Results like these are the rule; experts either aren’t very good at providing an honest description of the uncertainty in their forecasts, or they aren’t very interested in doing so. This property of overconfident predictions has been identified in many other fields, including medical research, political sci

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“No amount of sophistication is going to allay the fact that all your knowledge is about the past and all your decisions are about the future.” – Kolossus

Financial crises—and most other failures of prediction—stem from this false sense of confidence. Precise forecasts masquerade as accurate ones, and some of us get fooled and double-down our bets. It’s exactly when we think we have overcome the flaws in our judgment that something as powerful as the American economy can be brought to a screeching ha

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Carved on the wall at University of Chicago is a quote from Lord Kelvin that says, “When you cannot measure, your knowledge is meager and unsatisfactory.” He’s not wrong, but the danger is assuming that if something can’t be measured it doesn’t matter. The opposite is true: Some of the most important forces in the world—particularly those regarding

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Third, we should be very cautious in our attitudes about specific policies. Even if we succeed in taking true aim at what we think are the best courses of action, the chance that we are right on the specifics—even if the chance is as high as possible—is still not very high. It’s like trying to guess at the origin of the universe. The best you can d

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