Tag: math

Maybe Nate Silver Was Wrong

By James Kwak

I think Nate Silver does a good job aggregating polls to make meaningful quantitative predictions about upcoming elections. But as he said himself shortly before the election, if the polls he relies on are systematically biased, then his forecasts are going to be off.* Many people have noted that Silver (and other quantitative poll aggregators like Sam Wang) correctly predicted an Obama victory and the outcomes in most if not all states.

But the fact remains that Obama did modestly better than the polls, and hence the poll aggregators, expected (not to mention than the Romney campaign expected). We shouldn’t read too much into this, as even where Obama significantly overperformed—like in Iowa, where Silver forecast a 3.2 percentage point victory and the actual came in at 5.7 points—the results were within the confidence intervals. But it’s also possible that the polls really were systematically biased, only they were biased against Obama—not against Romney, as conservative pundits were claiming in the last days.

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Bathtubs for Beginners

By James Kwak

In economics life there’s a basic conceptual distinction between a flow and a stock. A flow is a something that occurs over some period of time, like water pouring from a faucet into a bathtub. A stock is something that exists at a specific moment of time, like the water in that bathtub. You measure a flow over a period of time (e.g., gallons per minute); you measure a stock at a specific moment in time (e.g., gallons). For a business, the income statement (revenues and costs in a year) measures flows, while the balance sheet (assets and liabilities) measures a stock. That’s why the income statement is dated for a year (or a quarter) and the balance sheet is dated for a specific day. Everyone understands this. If you didn’t, you would get confused between your salary and your bank account.

But not David Brooks.

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