A good read at PrudentBear.com on the risks of mathematical modeling (in spite of the anachronistic use of the term “computer tapes”).
It’s not as if Wall Street had no warning; mathematical models based on modern financial theory had caused huge losses as far back as 1987, and had caused the collapse of Long Term Capital Management in 1998. Yet the world’s best remunerated people went on using the mathematical models that had caused moderate sized disasters before, only to watch them cause a truly impressive disaster in 2008. It must have been some kind of compulsion.
Turning now to my other example, that of global warming: the possibility that excess carbon dioxide, through a “greenhouse effect” might cause a global rise in temperature is based on well-established chemistry and physics. Deniers of the possibility of global warming are thus being as irrational as the extreme eco-alarmists; global warming is indeed possible because of physical and chemical processes that are perfectly well understood, indeed fairly elementary.
The difficulty arises in estimating whether it is actually happening. The rise in temperatures so far observed is well within the level of “noise” in global temperatures over a period of a century or so, let alone the more extreme fluctuations that have taken place when the observation period is extended to millennia. It is thus necessary to match the very limited temperature data we have, stretching back no more than a century on a worldwide basis, with secondary observations of such things as tree rings and ice cores, synthesizing the result with a computer model of what is believed to be the carbon forcing process in order to predict the range of possible future warming effects.
And now for some (badly narrated) data.