The New Nostradamus
I stumbled upon an article called The New Nostradamus, reporting of a game-theoretic model which predicts political outcomes with startling effectiveness. The results are very impressive. However, the site hosting the article is unfamiliar to me, so I’m not certain of the article’s verity, but a quick Google seems to support the claims, at least on a superficial skimming. Here’s his TED talk. The model seems almost too good to be true, though. Anybody know more?
Some choice bits from the article:
In fact, the professor says that a computer model he built and has perfected over the last 25 years can predict the outcome of virtually any international conflict, provided the basic input is accurate. What’s more, his predictions are alarmingly specific. His fans include at least one current presidential hopeful, a gaggle of Fortune 500 companies, the CIA, and the Department of Defense.
The criticism rankles him, because, to his mind, the proof is right there on the page. “I’ve published a lot of forecasting papers over the years,” he says. “Papers that are about things that had not yet happened when the paper was published but would happen within some reasonable amount of time. There’s a track record that I can point to.” And indeed there is. Bueno de Mesquita has made a slew of uncannily accurate predictions—more than 2,000, on subjects ranging from the terrorist threat to America to the peace process in Northern Ireland—that would seem to prove him right.
To verify the accuracy of his model, the CIA set up a kind of forecasting face-off that pit predictions from his model against those of Langley’s more traditional in-house intelligence analysts and area specialists. “We tested Bueno de Mesquita’s model on scores of issues that were conducted in real time—that is, the forecasts were made before the events actually happened,” says Stanley Feder, a former high-level CIA analyst. “We found the model to be accurate 90 percent of the time,” he wrote. Another study evaluating Bueno de Mesquita’s real-time forecasts of 21 policy decisions in the European community concluded that “the probability that the predicted outcome was what indeed occurred was an astounding 97 percent.” What’s more, Bueno de Mesquita’s forecasts were much more detailed than those of the more traditional analysts. “The real issue is the specificity of the accuracy,” says Feder. “We found that DI (Directorate of National Intelligence) analyses, even when they were right, were vague compared to the model’s forecasts. To use an archery metaphor, if you hit the target, that’s great. But if you hit the bull’s eye—that’s amazing.”
Gets good money for it:
Though controversial in the academic world, Bueno de Mesquita and his model have proven quite popular in the private sector. In addition to his teaching responsibilities and consulting for the government, he also runs a successful private business, Mesquita & Roundell, with offices in Rockefeller Center. Advising some of the top companies in the country, he earns a tidy sum: Mesquita & Roundell’s minimum fee is $50,000 for a project that includes two issues. Most projects involve multiple issues. “I’m not selling my wisdom,” he says. “I’m selling a tool that can help them get better results. That tool is the model.”
“In the private sector, we deal with three areas: litigation, mergers and acquisitions, and regulation,” he says. “On average in litigation, we produce a settlement that is 40 percent better than what the attorneys think is the best that can be achieved.” While Bueno de Mesquita’s present client list is confidential, past clients include Union Carbide, which needed a little help in structuring its defense after its 1984 chemical-plant disaster in Bhopal, India, claimed the lives of an estimated 22,000 people; the giant accounting firm Arthur Andersen; and British Aerospace during its merger with GEC-Marconi.
The method should be of special interest to the OB/LW audience, as it brings to mind discussions about self-deception and evolutionary vs. acknowledged goals and behavior:
Which illustrates the next incontrovertible fact about game theory: In the foreboding world view of rational choice, everyone is a raging dirtbag. Bueno de Mesquita points to dictatorships to prove his point: “If you liberate people from the constraint of having to satisfy other people in order to advance themselves, people don’t do good things.” When analyzing a problem in international relations, Bueno de Mesquita doesn’t give a whit about the local culture, history, economy, or any of the other considerations that more traditional political scientists weigh. In fact, rational choicers like Bueno de Mesquita tend to view such traditional approaches with a condescension bordering on disdain. “One is the study of politics as an expression of personal opinion as opposed to political science,” he says dryly. His only concern is with what the political actors want, what they say they want (often two very different things), and how each of their various options will affect their career advancement. He feeds this data into his computer model and out pop the answers.
In his continuing work for the CIA and the Defense Department, one of his most recent assignments has been North Korea and its nuclear program. His analysis starts from the premise that what Kim Jong Il cares most about is his political survival. As Bueno de Mesquita sees it, the principal reason for his nuclear program is to deter the United States from taking him out, by raising the costs of doing so. “The solution, then, lies in a mechanism that guarantees us that he not use these weapons and guarantees him that we not interfere with his political survival,” he says.
Recently, he’s applied his science to come up with some novel ideas on how to resolve the Israeli-Palestinian conflict. “In my view, it is a mistake to look for strategies that build mutual trust because it ain’t going to happen. Neither side has any reason to trust the other, for good reason,” he says. “Land for peace is an inherently flawed concept because it has a fundamental commitment problem. If I give you land on your promise of peace in the future, after you have the land, as the Israelis well know, it is very costly to take it back if you renege. You have an incentive to say, ‘You made a good step, it’s a gesture in the right direction, but I thought you were giving me more than this. I can’t give you peace just for this, it’s not enough.’ Conversely, if we have peace for land—you disarm, put down your weapons, and get rid of the threats to me and I will then give you the land—the reverse is true: I have no commitment to follow through. Once you’ve laid down your weapons, you have no threat.”
Bueno de Mesquita’s answer to this dilemma, which he discussed with the former Israeli prime minister and recently elected Labor leader Ehud Barak, is a formula that guarantees mutual incentives to cooperate. “In a peaceful world, what do the Palestinians anticipate will be their main source of economic viability? Tourism. This is what their own documents say. And, of course, the Israelis make a lot of money from tourism, and that revenue is very easy to track. As a starting point requiring no trust, no mutual cooperation, I would suggest that all tourist revenue be [divided by] a fixed formula based on the current population of the region, which is roughly 40 percent Palestinian, 60 percent Israeli. The money would go automatically to each side. Now, when there is violence, tourists don’t come. So the tourist revenue is automatically responsive to the level of violence on either side for both sides. You have an accounting firm that both sides agree to, you let the U.N. do it, whatever. It’s completely self-enforcing, it requires no cooperation except the initial agreement by the Israelis that they are going to turn this part of the revenue over, on a fixed formula based on population, to some international agency, and that’s that.”