Glen Alleman at Herding Cats has it right:
Doing stupid things on purpose is not the same is a highly unlikely event occurring – a long tailed distribution. The effect on the economy may be the same, but had the modelers at the rating agencies simply included the possibility of a negative direction for the price of homes they would have seen this coming.
I started On Deciding . . . Better in late 2009 to discuss the philosophy and techniques of decision making. I had been introduced to the techniques of Decision Theory through my work in drug development. In the end, mastering the techniques took me in a different direction, understanding the nature of uncertainty itself.
Over the last decade, I’ve had little opportunity to directly apply the analytic tools, but instead have read more widely in neuroscience and linguistics.
The tools of decision theory are a set of models that are useful in making uncertainty more explicit. I remain convinced that our mental models are the primary drivers of perception and a basic neurological mechanism behind our conscious experience.
It makes sense that the accuracy of our mental models is the most important determinant of success. Not our planning or the quality of our data, but how well the consequences of current choices.
