Tuesday, June 22, 2010

Presidents have no claim over economic performance, good or bad

No one government or president can be associated to economic performance (good or bad) within a given period.

I argued this a while back: there is no evidence of a causal relationship between who is president (or the character of the president) and economic prosperity, perhaps not even a strong correlation.

The links between policy changes of one administration and their effect on economic performance within the term of said administration highlighted historically are after-the-fact pairings lifted from a bucket containing a large number of interlinked variables and parameters and therefore not a good basis for sound regression testing (i.e. the part coincidence may play in an isolated pairing is unacceptably high). That in essence is Nassim Taleb’s thesis in his book The Black Swan – that variables highlighted in most economic models are not soundly isolated from variables that are out-of-scope of said models, and therefore any conclusions and, worse, forecasts drawn from these models are dangerously unreliable.

Drilling down to a smaller scale, we can see the flaw in that quaint platitude that defined Noynoy Aquino's campaign -- "Kung walang corrupt, walang mahirap" ("If there is no corruption, there will be no poverty") in the following insightful words from a friend of mine:
The bottom line is, there is no direct CAUSAL relationship between corruption and poverty. From time to time, you encounter cases where there is a CORRELATION between corruption and poverty, but as elementary statistics teaches us, correlation does not mean causality. This is the core of the humongous logical fallacy that is Noynoy's slogan "Kung walang corrupt, walang mahirap".

It's simple, really™ -- though not for the small-minded.

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