Thursday, October 29, 2009

The Scientific Conceit


This interview with David Berlinski contains this precious observation:
The idea that science is a uniquely self critical institution is of course preposterous..scientists are no more self critical than anyone else, they hate to be criticized and never criticize themselves...There are local mechanisms of criticisms in science, within established theories if somebody publishes data that don't work out in a certain way, if there are mathematical flaws in a certain theory, these tend to get know, but large global criticisms of the scientific enterprise are very difficult to find, and certainly not being promulgated by the scientists with any ebullience or enthusiasm ... these people are only human, they hate criticism--me too! The idea that scientists are absolutely eager to get beaten up that's one of the myths, put out by the scientists, and it works out splendidly so that they can avoid criticism.

You know a naive or tendentious science writer when they start talking about how science is so different than other professions in how they objectively present their work for criticism. The journal publication process does filter out a lot of errors and unsubstantiated assertions that a journalist might get away with, but that's really a very narrow domain, it's like noting a New Yorker piece is meticulously checks for grammar (unlike my blog!). It's ruthless criticism in a very specific domain.

Look at Freakonomic's author Steve Levitt's work on the abortion-crime link. No referee thought, gee, how does this relate to the different black-white abortion rate relate to the difference in Black-White crime rate over the next 20 years? How did that relate the crime rate differential between 17 year olds and 35 year olds, 17 years after Roe? How does the small difference in fertility post Roe relate to an selectivity effect (clearly, as abortions went up, so did conceptions)? What if you adjusted for population growth? All of these are large, glaring points against Levitt, really common sense type rebuttals, yet he never had to address them because he presented a panel regression with interaction terms.

I have refereed papers with interaction terms, and they are almost always garbage, because they generate a lot of collinearity, and the nonlinear correlations manifest themselves in a bunch of significant coefficients in linear regressions, because if the 'true' relation is y=x^2, and x=A+2B+e, then a regression on y with A and B will have a positive coefficient on A, and a negative on B. Levitt's study has state*age, year*age, and state*year as explanatory variables. Why stop there, why not state*year*age? With tens of regressors, many product terms, you get garbage. Yet, I've refereed reports from professors at Harvard with this stuff, so it's not something that's necessarily wrong, just practically stupid. There has been no important result that shows up only via interaction terms in regressions, just as there has never been an important relationship evinced solely via 3-stage least squares, or the Generalize Method of Moments (GMM). Ever. Rather than correcting error terms for heteroskedasticity or something inside-the-box, there should be more skepticism applied to these kitchen-sink approaches.

But, Levitt is still considered a top-level researcher, and he has a very thin skin. For example, reading his coauthor's response to criticism of his Global Warming chapter in their new book, the tone seemed very defensive, like someone unused to criticism. In sum, Levitt, like most scientists, is exposed to a very narrow set of criticisms, ones that most laypeople could not counter to be sure (must get one's standard errors correct), but that's really no different than the fact that most people (me included) could not write prose for the New Yorker with their syntax errors. In most ways he is unexposed to real criticism and acts accordingly.

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The Advisor Weblog


Live coverage

Posted: 29 Oct 2009 04:40 AM PDT

In a few minutes, I will be starting the live coverage of the U.S. GDP release. Join me at Fxstreet.com home page.


Best pair to trade now: EUR/JPY

Posted: 29 Oct 2009 04:27 AM PDT

Gbp/Usd pushing higher

Posted: 29 Oct 2009 03:29 AM PDT

Gbp continues pushing higher, close to yesterday’s high of 1.6453, also 23.6% of last Fibonacci rally. Above that level, pair likely approach to 1.6490 area ahead of key 1.6520. This level has been quite strong the past months, so pair should retreat from there. If broken pound will gain more upside momentum, and likely approach to the 1.6550/60 area. To the downside, first support comes at 1.6410, followed by 1.6350 area, and 1.6320. The pair has quite a messy congestion zone between 1.6280/1.6320, so we need to see it clearly under that levels, to call for a downtrend continuation.

 


Can Pound hold?

Posted: 29 Oct 2009 03:18 AM PDT

While I prepare the Pound technical perspective for today, take a look at this article: economist expect more QE in the U.K. Meeting will be next week, so we don’t have to wait too long to see the answer ;)

http://business.timesonline.co.uk/tol/business/economics/article6894523.ece


Eur/Jpy technical view

Posted: 29 Oct 2009 03:04 AM PDT

Pair also reached a strong Fibonacci level, and rebounded from 132.80 lows, after failing to extend the downside movement under the 61.8% of the last daily rally. 4 hours indicators are way over sold, suggesting more upside to come before more clear definitions, if the pair manages to regain the 134.00 level. Above it, next resistances come at 134.50 and 135.10, while supports for next hours lie at 133.20 and mentioned 132.80 lows. An acceleration under that level, could trigger more selling in the pair, with 132.00 as next target zone to consider.

 


Eur/Usd levels

Posted: 29 Oct 2009 02:35 AM PDT

Taking a look at 4 hours charts, pair has reached and remain over sold since past American session. Despite the strong fall, Eur failed to break the 61.8% retracement of the daily upleg, and right now is hitting 200 EMA, that usually acts as dynamic resistance level. Also, 20 SMA holds a strong bearish slope, so I expect some upside corrective movements, before next down leg. If the correction extends above 1.4810, then the downside will be more limited for today. Resistances from current level are 1.4770, 1.4810 and above, 1.4845, 38.2% of the rally. A 4 hours candle opening under 1.4700, will find next supports at 1.4670, and then 1.4620.

 


Majors’s sentiment for today

Posted: 29 Oct 2009 02:15 AM PDT

Here is majors sentiment for today:

Eur/Usd: Bearish

Gbp/Usd:Slightly Bullish

Usd/Chf: Bullish

Usd/Jpy: Bearish

Eur/Gbp: Bearish


Starting the day

Posted: 29 Oct 2009 02:14 AM PDT

Hello everybody, and welcome back. After American session was over, I reviewed my charts for the Asian session webinar, and I found out many crosses reached key Fibonacci retracement levels: EUR/USD at the 61.8% of the last daily up leg, USD/JPY at the 38.2% also daily rally, EUR/JPY at a 50%, GBP/USD holding above a 38.2%, AUD, even DJIA pulled back to a monthly 61.8% with yesterday’s fall. Quite interesting, showing we are still in a correction of previous trend; no calls for a change. During Asian session, Yen crosses move one step further, but that’s it. Investors had made some short covering ahead of Europe, but market will be waiting for the U.S. GDP to decide if dollar recovery will extend. Expected positive after several quarters of negative readings, let’s see how much optimism/fear the report can trigger: I wil be covering  it Live! from Fxstreet.com home page. Anyway, we have a lot of data before and after, so here is the link for today’s calendar:

http://www.fxstreet.com/fundamental/economic-calendar/

Have a great day!