Contra Epstein, Good Explanations Predict

Epstein has argued that an explanation\'s capacity to make predictions should play a minor role in its evaluation . This view contradicts centuries of scientific practice and, at least, decades of philosophy of science. We argue that the view is not only unfounded but seems to arise from a mistaken fear that ABM models are in need of defense against the criticism that they don\'t necessarily forecast events in the natural or social world.ABM, Agent Based Model, Modeling, Prediction, Explanation, Philosophy of Science

Not All Explanations Predict Satisfactorily, and Not All Good Predictions Explain

This short comment on Epstein's (2008) paper and on the response by Thompson and Derr argues that the symmetry between explanation and prediction cannot satisfactorily be discussed without making clear what prediction means - depending on which connotations the authors have with 'prediction' their arguments can or cannot be accepted.[No keywords]

Contributions of economists to the housing-price bubble

After the bursting of the housing-price bubble in 2006 and ensuing financial crisis, there has been much discussion of what economists could have done differently to help avert the crisis and "Great Recession" that followed. One dimension of this concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data from 24 California newspapers on assessments and predictions offered by economists as to whether bubbles were forming in the state's housing markets. In brief, we find that the California public was fairly decently served by economists offering their views via the media -- although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.JEL classification: R21, D31, D12, E32

Reaction to Uncertainty and Market Mechanism:Experimental Evidence

Abstract Much of the evidence supporting the Ellsberg's paradox comes from experiments on individual choice and judgement. In this study, we address the issue whether, in market experiments, there is a tendency for anomalous behaviour to disappear or to be reduced as a consequence of market experience and feedback. We empirically test the validity of this assumption by running an auction market for the sale of both risky and uncertain prospects. We compare bidding behaviour and prices in market-like settings with valuations obtained from individual pricing tasks. We conclude that, with the repetition of the market experience, there is a tendency for subjective expected utility to perform better. However, economists' general assumption that, in laboratory experiments, poor performance of SEU is due to the lack of financial incentives or to the lack of market-like settings is by no means supported by our data.

Asking the Oracle: introducing forecasting principles into agent-based modelling

This paper presents a set of guidelines, imported from the field of forecasting, that can help social simulation and, more specifically, agent-based modelling practitioners to improve the predictive performance and the robustness of their models. The presentation starts with a discussion on the current debate on prediction in social processes, followed by an overview of the recent experience and lessons learnt from the field of forecasting. This is the basis to define standard practices when developing agent-based models under the perspective of forecasting experimentation. In this context, the guidelines are structured in six categories that correspond to key issues that should be taken into account when building a predictor agent-based model: the modelling process, the data adequacy, the space of solutions, the expert involvement, the validation, and the dissemination and replication. The application of these guidelines is illustrated with an existing agent-based model. We conclude by tackling some intrinsic difficulties that agent-based modelling often faces when dealing with prediction models.project Social Ambient Assisting Living - Methods (SociAAL), supported by Spanish Council for Science and Innovation, with grant TIN2011-28335-C02-01 and the Spanish MICINN project CSD2010-00034 (SimulPast CONSOLIDER-INGENIO 2010). We also thank the support from the Programa de Creación y Consolidación de Grupos de Investigación UCM-BSCH, GR35/10-A (921354

Growth engines of the South? South Africa's, Brazil's and Turkey's market constellations in comparison

The world is experiencing its worst recession in 80 years. What started as US sub-prime financial turmoil has developed into the first global recession since the infamous 'Great Depression' of the early 1930s. However gloomy the perspectives for the very short term are, there will be a recovery eventually. South Africa, Brazil and Turkey (SABT) are among those countries that may be expected as emerging market economies (EME) not only to continue to converge towards per-capita income levels of highly developed nations but also to be the best candidates - next to China and India - of serving as the locomotives of world GDP- and trade growth after the depression. Of course, whether SABT are not merely potentially in a position to create a brighter future for their people and the world economy but can transform such potentials into reality, depends on economic governance pursued by governments and collective actors in these countries. Therefore, it appears interesting to inquire into the macroeconomic governance structures of SABT in order to assess their capabilities for enhancing growth and employment and to converge to the OECD average in the medium to long run. --market constellations,policy regimes,institutions,Post Keynesianism,comparative economic systems

Iqbal, Procedural Mismatches, and Civil Rights Litigation

Understanding the twin pleading cases of Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal from the vantage point of only a few months (or even years) requires as much prediction as explanation. Early confusion is a product of the long-heralded link between substance and procedure. What we are seeing now may be less about Court-imposed changes to procedure as about changes to substantive law and a mismatch between new substance and the old procedure of the Federal Rules. Much of the current business of federal courts involves constitutional litigation under 42 U.S. C. §S 1983 and Bivens, a species of civil action unheard of when the Federal Rules and the system of notice pleading and broad, wide-ranging discovery were created in 1938. That pleading system arguably does not work with such modern litigation and Iqbal reflects the Court\u27s effort to make federal pleading and discovery rules more consistent and more functional with this particularly vulnerable area of new federal substance. Unfortunately, the greater detail demanded by the new pleading rules may be impossible in many civil rights cases, where plaintiffs cannot know or plead essential information with particularity at the outset without the benefit of discovery-discovery that Iqbal stands to deny to plaintiffs who fail to plead with the necessary detail. The predictable result, illustrated by one Ninth Circuit decision just two months after Iqbal, will be a significant decrease in enforcement and vindication of federal constitutional and civil rights

Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle

This paper suggests a new explanation for the low level of annuitization, which is valid even if one assumes perfect markets. We show that, as soon there exists a positive bequest motive, sufficiently risk averse individuals should not purchase annuities. A model calibration accounting for temporal risk aversion generates a willingness-to-pay for annuities, which is significantly smaller than the one generated by a standard Yaari (1965) model. Moreover, the calibration predicts that riskless savings finances one third of consumption, in line with empirical findings.annuity puzzle, insurance demand, bequest, intergenerational transfers, temporal risk aversion, multiplicative preferences