Gary N. Smith

Gary N. Smith is the Fletcher Jones Professor of Economics at Pomona College. His research on financial markets statistical reasoning, and artificial intelligence, often involves stock market anomalies, statistical fallacies, and the misuse of data have been widely cited. He is the author of The AI Delusion (Oxford, 2018) and co-author (with Jay Cordes) of The Phantom Pattern (Oxford, 2020) and The 9 Pitfalls of Data Science (Oxford 2019). Pitfalls won the Association of American Publishers 2020 Prose Award for “Popular Science & Popular Mathematics”.

Archives

Big Brother Is Watching You (And Trying to Read Your Mind)

_{Chinese researchers now claim to have developed technology that can read our minds}_{Gary Smith
July 19, 2022}

One of the most popular story lines in the widely acclaimed television show The Good Wife (2009–2016) is when National Security Agency (NSA) techies entertain themselves by eavesdropping on the heroine’s personal life. It clearly resonated with viewers and reinforced the fears of many that the NSA might be listening to their conversations. Indeed, they might be. In 2013 James Clapper, Director of National Intelligence, was asked by U.S. Senator Ron Wyden about whether NSA collects “any type of data at all on millions or hundreds of millions of Americans.” Clapper answered, under oath, “No sir, not wittingly.” Clapper had been informed the day before that he would be asked this question and he was offered an opportunity the day…

We Love Baseball Because of — Not Despite — Lady Luck

_{With a big game approaching, emotions run high so let’s heed some statistical realities}_{Gary Smith
July 15, 2022}

As we approach the MLB All-Star Game in Los Angeles on July 19, we can be confident of one thing — most current league leaders will not do as well after the break as they did before it. Baseball broadcaster and National Sportswriter of the Year Peter Gammons was among the first to notice this. He wrote in 1989 that, of those baseball players who hit more than 20 home runs before the All-Star break, 90 percent pegged fewer than 20 after the break. Gammons concluded that there was a “second-half power outage,” perhaps because the sluggers got nervous about the possibility of breaking a home run record. More recently, sports forecaster Max Kaplan made a similar observation, which he…

AI Would Run the World Better Than Humans, Google Research Claims

_{Don’t believe the headlines: Google’s inhouse game does not show that AI is ready to rule the world}_{Gary Smith
July 11, 2022}

Sixty years ago, conservative provocateur William F. Buckley wrote, “I would rather be governed by the first 2,000 people in the telephone directory, than by the Harvard University faculty.” Buckley was a Yale man, but his barb was not intended to compare Harvard to Yale. He later explained: Not, heaven knows, because I hold lightly the brainpower or knowledge or generosity or even the affability of the Harvard faculty: but because I greatly fear intellectual arrogance, and that is a distinguishing characteristic of the university which refuses to accept any common premise. Now may be the time to update Buckley’s incendiary remarks: I would rather be governed by the first 2,000 people in the telephone directory, than by a black…

Can AI Really Predict Crime a Week in Advance? That’s the Claim.

_{University of Chicago data scientists claim 90% accuracy for their algorithm using past data — but it’s hard to evaluate}_{Gary Smith
July 6, 2022}

The University of Chicago recently announced to great fanfare that, Data and social scientists from the University of Chicago have developed a new algorithm that forecasts crime by learning patterns in time and geographic locations from public data on violent and property crimes. The model can predict future crimes one week in advance with about 90% accuracy. University of Chicago Medical Center, “Algorithm Predicts Crime a Week in Advance, but Reveals Bias in Police Response” at Newswise (June 28, 2022) Many thought immediately of the 2002 movie Minority Report, in which three psychics (“precogs”) visualize murders before they occur, thereby allowing special PreCrime police to arrest would-be assailants before they can commit them. Have these University of Chicago researchers made…

AI: Is Thinking Humanly More Important Than Acting Rationally?

_{I have documented many examples of GPT-3 AI’s failure to distinguish meaningful from meaningless correlations — and invite readers to contribute their own}_{Gary Smith
June 13, 2022}

The potential power of artificial intelligence (AI) has been touted for more than 60 years though a generally accepted definition is elusive. AI has often been defined in terms of human-like capabilities. In 1960, for example, AI pioneer Herbert Simon, an economics Nobel laureate and Turing Award winner, predicted that “machines will be capable, within twenty years, of doing any work a man can do.” In 1970 Marvin Minsky, also a Turing Award winner, said that, “In from three to eight years we will have a machine with the general intelligence of an average human being.” More recently, in 2015, Mark Zuckerberg said that, “One of our goals for the next five to 10 years is to basically get better…

Some Economic Models are Alluring, Others are Useful

_{In some markets, prices are affected by market forces and in others, like the job market, they are not}_{Gary Smith
May 25, 2022}

Statistician George Box is credited with the aphorism, “All models are wrong, but some are useful.” Unfortunately, as the brilliant economist Ed Leamer, once quipped, “Economists are like artists. They tend to fall in love with their models.” A large part of the art of economics is distinguishing between attractive models and useful models. The traditional bedrock of economics is the demand-and-supply model. Every introductory economics course explains how demand and supply are related to price and how the equilibrium price is where demand is equal to supply. This can be a very useful model for predicting how changes in demand and supply affect prices and trades — if we make the tempting assumption that the market price is equal…

Turing Tests Are Terribly Misleading

_{Black box algorithms are now being trusted to approve loans, price insurance, screen job applicants, trade stocks, determine prison sentences, and much more. Is that wise?}_{Gary Smith
May 11, 2022}

In 1950 Alan Turing proposed that the question, “Can machines think?,” be replaced by a test of how well a computer plays the “imitation game.” A man and woman go into separate rooms and respond with typewritten answers to questions that are intended to identify the players, each of whom is trying to persuade the interrogators that they are the other person. Turing proposed that a computer take the part of one of the players and the experiment be deemed a success if the interrogators are no more likely to make a correct identification. There are other versions of the game, some of which were suggested by Turing. The standard Turing test today involves a human and a computer and…

Will Higher Prices Disarm Russia? It’s Complicated…

_{The effects of hyperinflation are subtle, but very real}_{Gary Smith
May 3, 2022}

The annual rate of consumer price inflation in Russia was 9% in February and 17% in March. For producer prices, the March number was 27%. Is Russia headed for hyperinflation, with prices increasing at triple-digit rates or more? I don’t know, but it is worth remembering what happens during hyperinflations. Many people believe that higher prices make everyone worse off. This is not true. Buyers pay more, but sellers receive more. One person’s higher price is another’s higher income. If all prices and incomes were to increase by the same amount — say 10 percent — everyone’s real, inflation-adjusted income would be unchanged. The true costs of inflation are more subtle. In practice, within every inflation, some prices increase more…

The AI Illusion – State-of-the-Art Chatbots Aren’t What They Seem

_{GPT-3 is very much like a performance by a good magician}_{Gary Smith
March 21, 2022}

Artificial intelligence is an oxymoron. Despite all the incredible things computers can do, they are still not intelligent in any meaningful sense of the word. Decades ago, AI researchers largely abandoned their quest to build computers that mimic our wondrously flexible human intelligence and instead created algorithms that were useful (i.e., profitable). Despite this understandable detour, some AI enthusiasts market their creations as genuinely intelligent. For example, a few months ago, Blaise Aguera y Arcas, the head of Google’s AI group in Seattle, argued that “statistics do amount to understanding.” As evidence, he cites a few exchanges with Google’s LaMDA chatbot. The examples were impressively coherent but they are still what Gary Marcus and Ernest Davis characterize as “a fluent spouter of bullshit” because computer algorithms…

In It For the Money: The Trump Coin Sham

_{Beware deceitful memorabilia hawkers who sell cheap mementos, hoping you'll be the fool that helps make them rich}_{Gary Smith
March 16, 2022}

Americans have a seemingly insatiable demand for memorabilia, no matter how cheaply it is made or how cheesy it looks. Some are preparing for their nostalgic years; some think they are making smart investments in collectibles that become more valuable as time passes. The problem with “investing” in collectibles is that an investment’s intrinsic value depends on how much income it generates. Stocks, bonds, rental properties, and profitable businesses all have intrinsic value. Mementos don’t. They rely on the Greater Fool Theory. If fools don’t appear, memento collectors are stuck with cheap and cheesy trinkets. This sobering reality does little to discourage people intoxicated by dreams of riches. For example, the White House Gift Shop sells a large collection of…