I wouldn't normally speak about myself in a blog post and other than my opinions, in my posts, you would be hard pressed to learn anything specific about me. Because at the end of the day my posts are about what I believe is right for the country, not about me or my life. This post is different, what I am about to tell you is in no way meant as a boast. Rather, I want to establish my credentials simply so that you will know that I know what I am talking about not simply from an opinion perspective, but from a professional assessment.
I have spent the last twenty years developing computer models, models that generally lent themselves to business modeling and forecasting. I have done business planning, and stock market simulation, using Monte Carlo simulation, linear programming, best case, worst case, most likely case, scenario comparison, sensitivity analysis, etc. My undergraduate degree is a Bachelor of Science in Business Administration with a concentration in "Decision Science" and my graduate degree is a Masters of Business Administration during which I did a great deal of work in quantitative analysis. So when I tell you I am in expert in this field that statement comes with a significant amount of third party credibility, and real world experience. When I make the following statements, I am not theorizing, hypothesizing or repeating what I read somewhere. Rather I am telling you how a seasoned professional with twenty plus years of experience in the field is assessing the situation.
Recently, the Obama administration put forward their ten year assessment of where their budget for the upcoming year will, if unchanged take the country. Their numbers differ by about twenty percent over the period in question (about ten years) from the numbers the Congressional Budget Office (CBO) came up with, when they analyzed the budget and forecast put forward by the administration. Other than the size of the numbers involved and the ghastly deficits produced by this budget there is nothing particularly significant about the fact that the two models differ. In fact, in a ten year projection relevant to natural systems such as markets a 20% difference is actually quite close and that makes the results that much more chilling (but the effects of a $20 Trillion national debt are the subject of future posts)
So to save you the four plus years of college and the many years of learning the trade there are some basic rules about modeling and simulation that will help you understand the point of this post:
1) Natural systems - markets, weather, etc. are far more difficult to model than synthetic systems (such as assembly lines or traffic patterns)
2) The greater the level of detail required of the model the less accurate the results are going to be. In other words if you want to know if the economy is going to grow or shrink in 2010, that is far easier to predict than by precisely how much that in turn is far easier to predict that if a particular stock is going to go up or down and that is easier to know than how much a stock will go up or down.
3) Any model has a limited number of inputs that each drives the model in a certain direction and among those inputs are some assumptions that the modeler makes each one of which has a different degree of impact on the results. The amount of sensitivity can have significant impact on the model results even when the modeler makes seemingly modest adjustments to only one or two assumptions.
4) Lastly- anyone, no matter how much education or experience who tells you that they know precisely what will happen in the future, by a certain amount, because a model they built tells them so, is wrong, misapplying the tools, or lying. If by chance they happen to be right, it is simply luck, not skill.
With that said, I want to change your focus from the budget to global warming. If the budget guys can't predict within 20% of each other what the economy will look like in the next ten years. And through tax policy, monetary policy, law making and regulatory policy they control many of the inputs. Common sense should tell you the degree to which some quasi-meteorologist is going to be right. Particularly when you consider that they are using essentially the same tools and mathematical techniques to forecast global warming over the next 50-100-200 years as are being used by the economist inthe administration. I can tell you with 100% certainty that when someone says, “The median temperature of the earth will increase by 2 degrees Celsius by the year 2080 and that the increase will have effects A B or C" they are wrong, period.
The earth may heat by that amount or more or less. The affect may be A B or C or it may be K L or M. When the weather changes (and it always changes, after all what makes you think the weather is the same now as it was 200 years ago?) will it be because the output of the sun changed, the orbit of the earth changed, the magnetosphere of the earth changed (think it's constant? Just look at the shifting patterns of the northern lights), the reflectivity of the changes of the earth changed over time. (due to deforestation) or that concentrations of CO2 in the atmosphere went up? The likelihood is that it was due to an interplay between all of these factors. I am not saying that things won't change. I am not saying that man couldn't be better stewards of the riches that we have been granted.
The point is, that the interplay of these factors is too complex for the weatherman to predict with any clarity what the weather will be a month from now much less with any precision, hell even tomorrows forecast has +/- swing of 4-8 degrees. People forecasting 10-20-50-100-200 years from now, give me a break! Modeling and simulation give you a best guess. The snakeoil salesmen selling global warming never disclose the "guess" portion of the analysis, they state it as gospel and expect people to change based upon their guess.
I just thought that during a period when the limitations of modeling were on display for all to see (administration/CBO) that it would be illustrative to hold up the admitted margin of error between the CBO and administration numbers and compare them to the infallibility being presented on global warming. Since both sets of numbers are being built by people in the administration with an agenda, why are they right on global warming and wrong on the budget? Or is it the other way around?
