How To Operate A Crystal Ball
The 2016 Max M. Fisher Lecture and Prize for Excellence in Teaching
Mark White, Associate Practitioner-in-Residence in the International Economics Program
November 9, 2016
Professor Mark White, recipient of the 2016 Max M. Fisher Prize for Excellence in Teaching, spoke about the process of making predictions. He defined a prediction as a qualitative idea with three building blocks: an event, timing, and causality.
White introduced three concepts which can be used to think about making predictions. The first is the improbability principle. This is the idea that the likelihood that at least some improbable events will happen is quite high. The second is that of planning bias: people visualize the steps to success more easily than potential interruptions or obstacles. The third and last element is what he calls the time effect. Data is historical, but predictions go into the future. If predictions are made over longer periods of time, corrections are inevitable.
At times, seemingly stable situations are in fact unstable under the surface. White used the example of  regimes that were hit by the Arab Spring, starting from Tunisia. The self-immolation of the Tunisian street vendor Mohamed Bouazizi was the catalyst for the Arab Spring, but Tunisian society already exhibited many factors of instability that many analysts had missed. Lastly, White highlighted that belief systems tend to lead people to have excessive faith in the stability of any given structure. Beliefs systems will then encourage confirmation bias, which further encourages analysts to be blind to change. Change often only seems inevitable in retrospect, White said.
Video available at https://www.youtube.com/watch?v=xdu9lFZp9ck.