Selecting for groupthink

Stephen Buranyi says the scam that is academic publishing “actually holds back scientific progress”:

Given a choice of projects, a scientist will almost always reject both the prosaic work of confirming or disproving past studies, and the decades-long pursuit of a risky “moonshot”, in favour of a middle ground: a topic that is popular with editors and likely to yield regular publications.

The FCA says that active fund managers “did not outperform their own benchmarks after fees.”

These two observations are related. They show us that selection mechanisms – peer review, hiring fund managers and the funds market – don’t necessarily select for the best. A new paper (pdf) by George Akerlof and Pascal Michaillat discusses one way in which this can happen.

They start from some experiments with flour beetles in the 1950s and 60s. These found that when two different species were placed into jars of flour, it was not the case that the most biologically fit species came to dominate. Instead, sometimes one species did and sometimes the other. The reason for this was because the species were more likely to eat the eggs of the other species than those of their own. This meant that when one species increased relative to the other – perhaps for arbitrary reasons – it continued to increase still further. Such an “egg-eating bias”, say Akerlof and Michaillat, means that in science unfit paradigms might prevail over fitter ones - as Buranyi claims.

The egg-eating bias takes the form of professors or journal editors preferring candidates or papers in their own image – ones that work in their paradigm. This is sometimes because of simple favouritism. But it can also be simply because it’s easier to evaluate someone’s work if it is like your own.

This fits with the claims in economics that bad paradigms – such as (pdf) DSGE (pdf) or CAPM – have prevailed despite their empirical flaws.

It also fits with the poor performance of fund managers. One reason for this is that older fund managers hire and train younger ones on the basis of judgment-based stock selection rather than their ability to exploit proven means of beating the market such (pdf) as defensive or momentum investing. And as Bjorn-Christopher Witte shows, market forces do not necessarily weed out bad managers and favour good: markets are imperfect and sometimes perhaps even counter-productive selection mechanisms.

It also, of course, has implications for corporate management. It’s consistent with work by Dan Bernhardt, Eric Hughson and Edward Kutsoati who show that because bosses favour underlings in their own image, firms can become increasingly inefficient: for example, as finance-types exclude engineers. In the same vein, Eric Van den Steen has described (pdf) how “organizations have an innate tendency to develop homogeneous beliefs”. This is because like hires like, and then people learn from those similar to themselves.

You can also, of course, tell a story about gender bias along these lines. (And, of course, about the media).

The point here is simple. Institutions – be they markets, firms, universities, publishers or whatever – are (among other things) selection mechanisms. We should not assume that such mechanisms work perfectly to optimize efficiency or truth. We must look under the bonnet to ask how exactly they work, rather than tell ourselves just-so stories.

In particular, institutions select – perhaps not entirely intentionally – against cognitive diversity and for groupthink. But as John Stuart Mill warned, this can be “a social tyranny more formidable than many kinds of political oppression” which can end up “enslaving the soul itself.”

Comments

[Carol]

Yes, having done scientific research AND studies economics as an undergrad. I found out that mainstream economics ignores tons of reality-based evidence (they pick their paradigms); and science ignores results that don't confirm the current paradigm (in the publish or perish world).

[Derek Emery]

Political belief is a wonderful way to create a dullard out of an Honours graduate. There is no place for evidence-based reality in politics. See 'Emory Study Lights Up The Political Brain' https://www.sciencedaily.com/releases/2006/01/060131092225.htm
...emotionally biased reasoning leads to the "stamping in" or reinforcement of a defensive belief, associating the participant's "revisionist" account of the data with positive emotion or relief and elimination of distress. "The result is that partisan beliefs are calcified, and the person can learn very little from new data...
See "Science Confirms: Politics Wrecks Your Ability to Do Math" http://www.motherjones.com/politics/2013/09/new-study-politics-makes-you-innumerate/
...According to a new psychology paper, our political passions can even undermine our very basic reasoning skills. More specifically, the study finds that people who are otherwise very good at math may totally flunk a problem that they would otherwise probably be able to solve, simply because giving the right answer goes against their political beliefs...

[Charles]

C Northcote Parkinson ridiculed all of this back in the 1950s; that is why he came PNG in the academic world and bureaucracy.Read CNP's books such as The Law, In Law and Outlaw, etc,etc. The only institution which encouraged leadership was the Royal Navy up to 1815.

Innovation requires an adventurous spirit which is not required in institutions

[WokenUpBabe]

MULTICULTURALISM IS GENOCIDE activist pack - leaflets stickers note stamp http://www.ebay.co.uk/itm/-/162557894316?roken=cUgayN

[Ralph Musgrave]

Also journals and newspaper editors always prefer authors at the top of the profession – especially household name authors – because there is absolutely no way relevant editors can be criticised, however dreadful the content of articles or papers. For example when a Financial Times editor publishes a boring, content free article by Lawrence Summers (and normally they are pretty much content free), how can the editor possibly be criticised? I mean Lawrence Summers is former president of Harvard among other senior positions!!! End of argument.

An additional factor at play here is that 95% of the population attach far more importance to fame than to ideas. New ideas require readers to actually THINK (shock horror). 95% of the population will run away screaming if told they’ll have to endure mental strain.

[cityunslicker]

super article, would not disagree with a word of it.

[Magnus]

The above comments are a good example of groupthink. It seems your blog attract fellow malcontents.

However, I beg to differ. Your post is not super, it's lazy. Academic research is nothing like the market for fund-managers.

The problem with fund-managers is that they inherently cannot provide value-added. They are pure rent-seekers. In fact as you know mainstream economics can theoretically explain this fact, and indeed finds it to be the case in empirical research.

Academic research, inherently, does provide value-added. New knowledge is a public good. And academic research is quite well characterized by cut-throat competition. Whilst flashy publications count, in the long-run what counts is citations. These are visible, and at high counts impossible to manipulate. You only get these if your research matters. And you get promoted if your research is cited a lot.

In fact in the very top academic economic journals I would say the exact opposite of the claim that you endorse is true. Editors go out of their way to publish the 'exotic', rather than good middle-of-the-road research that confirms known results. If anything there is not enough consensus-building, rather than too much of it.

I often suspect that accusations of 'groupthink' basically are self-serving when particular people don't like what experts have to say, or for some other reason resent them. Basically it is a non-falsifiable cheap shot.

e.g. I think Ruth Lea accused the economics profession of groupthink given their overwhelming negative evaluation of Brexit.

It is a stick that the ignorati often use in order to justify ignoring evidence or even basic morality.

[John Williams]

The flour beetle story is a bit more complicated than Akerlof and Michaillat may realize. Beetle experiments are still going on! For example, consider the conclusion below from a 2014 paper at http://onlinelibrary.wiley.com/doi/10.1002/ece3.1254/epdf that concerns flour beetles raised in mixtures of flour and cornmeal. For economists, the most important lesson may be the authors' attitude toward data and models.

"In conclusion, we found clear experimental evidence that competition can drive selection for greater use of a novel resource. However, we also found evidence that competition instead drove reduced use of the novel resource. At present, we have no specific explanation for this apparently maladaptive behavior, although we are able to reject several proposed mechanisms and can propose several potential explanations. Regardless of the precise mechanism, it is clear that competition can sometimes drive niche contraction. Such niche contraction is significant because it undercuts the generality of ecological explanations for adaptive radiation and speciation. The implication is that the ecological theory of adaptive diversification may be more limited than previously believed. It is thus an open question whether intraspecific competition typically promotes or constrains diet diversification within populations, and how strongly it affects ecological speciation."

[Bonnemort]

“a social tyranny more formidable than many kinds of political oppression”

Surely the Theodore Dalrymple quote is apposite here.

"In my study of communist societies, I came to the conclusion that the purpose of communist propaganda was not to persuade or convince, nor to inform, but to humiliate; and therefore, the less it corresponded to reality the better. When people are forced to remain silent when they are being told the most obvious lies, or even worse when they are forced to repeat the lies themselves, they lose once and for all their sense of probity. To assent to obvious lies is to co-operate with evil, and in some small way to become evil oneself. One’s standing to resist anything is thus eroded, and even destroyed. A society of emasculated liars is easy to control. I think if you examine political correctness, it has the same effect and is intended to."

[David]

@ John Williams

Maybe flour beetles don't like cornmeal?
Or it is too difficult to chew?
Or they cannot digest it?
They are "flour" beetles after all....

I can "digest" neither Brexit nor Tory principles no matter how hard I try.
Maybe groupthink is no such thing.
Maybe some of us have a differently constructed hippocampus?
We just lean to groups that we like.

[Keith]

"When people are forced to remain silent when they are being told the most obvious lies, or even worse when they are forced to repeat the lies themselves, they lose once and for all their sense of probity. To assent to obvious lies is to co-operate with evil, and in some small way to become evil oneself." That certainly explains Trump and his fawning Cabinet.

[Postkey]

Someone who is trying to avoid 'group think'?

"The critics of neoclassical economics agree that economics should be about economic reality and should be demonstrably relevant to it. This will strike the non-economist as obvious. However, it is not obvious in mainstream economic thinking: the neoclassical school of thought is based on the deductive approach. This methodology argues that knowledge is brought about by starting with axioms that are not derived from empirical evidence, to which theoretical assumptions are added (again not empirically backed), and on the basis of which tools of logic (mathematics) are utilized to prove theoretical results. There is an alternative approach. This approach examines reality, identifies important facts and patterns, and then attempts to explain them, using logic, in the form of theories. These theories are then tested and modified as needed, in order to be most consistent with the facts of reality. This methodology is called inductivism."

https://books.google.co.in/books?id=5I2MDAAAQBAJ&lpg=PP1&dq=New%20Paradigm%20in%20Macroeconomics.&pg=PA253#v=onepage&q&f=false

[Egmont Kakarot-Handtke]

When institutions go awry
Comment on Chris Dillow on ‘Selecting for groupthink’

When Mr. Trump became President most people with not much more than normal TV/Press information knew intuitively that something had gone awry with the institution Presidency.

When Mr. Hoover declared in the late 1940s that there is no such thing as organized crime most people with not much more than normal newspaper information knew intuitively that something had gone awry with the institution Law Enforcement.

When the FED bailed out the too-big-to-fail banks in 2009 most people with not much more than normal media information knew intuitively that something had gone awry with the institution Banking.

When Nobel Laureate Arrow declared in the 1994 Richard T. Ely Lecture: “It is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals. Our behavior in judging economic research, in peer review of papers and research, and in promotions, includes the criterion that in principle the behavior we explain and the policies we propose are explicable in terms of individuals, not of other social categories.” most people with not much more than a superficial knowledge of General Equilibrium Theory knew intuitively that something had gone awry with the institution Science.

It is NOT such a rare event that institutions mutate into something that does not conform to, or even contradicts, their original mission statement. Science is defined by its ethics and the principle of self-governance. This works fine as long as everybody sticks to the protocol, which includes to accept a formal/empirical refutation if it so happens.

This does not work in economics since the Marginalists took over 140+ years ago. Morgenstern reminded his fellow economists back in 1941: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.”

Economics has stabilized itself institutionally as a cargo cult science which Feynman defined thus: “They’re doing everything right. The form is perfect. ... But it doesn’t work. ... So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.”

What is missing in economics is the true theory. The four main approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, and materially/formally inconsistent.#2 The current pluralism of false theories is the proof of institutional failure, which is intuitively clear to most people with not much more than a normal historical understanding of what science is all about.

The snag is, it it not clear to the representative economist.

Egmont Kakarot-Handtke

#1 See also ‘Feynman Integrity, fake science and the econoblogosphere’
http://axecorg.blogspot.de/2017/05/feynman-integrity-fake-science-and.html

#2 See also ‘Profit and stupidity’
http://axecorg.blogspot.de/2017/06/profit-and-stupidity.html

[Tristan]

I'm reminded of the book 'How Hippies Saved Physics'.
A summary is that it took a group of 'hippy' physicists to break physics out of a dead end and to actually face up to Bell's Inequality and so on.
They did produce a load of nonsense, but it took people to think outside the box, and who kept on pushing, to more physics forwards whilst most journals were not publishing their work because it didn't fit in with the prevailing trends.