I have snipped the abstract below from this paper – The Lure of Incredible Certitude
Forthright characterization of scientific uncertainty is important in principle and serves important practical purposes. Nevertheless, economists and other researchers commonly report findings with incredible certitude, reporting point predictions and estimates. To motivate expression of incredible certitude, economists often suggest that researchers respond to incentives that make the practice tempting. This temptation is the “lure” of incredible certitude. I flesh out and appraise some of the rationales that observers may have in mind when they state that incredible certitude responds to incentives. I conclude that scientific expression of incredible certitude at most has appeal in certain limited contexts. It should not be a general practice.
I have always found in science that there are two parallel philosophies. The first is Max Planck’s quote that science advances one funeral at a time. Meaning that rigid ideas can stay locked into the scientific milieu until their main proponents have died. This allows more radical and potentially better ideas to surface. This highlights the secondary notion that science self corrects and it this self correction that causes people to have conniptions because they want the world to be static and forever unchanging. Whenever I look at the field of economics I see a profession that struggles to self correct and really struggles to let go of outmoded ideas. The continually trumpeting of models that clearly have limited real world application is an example of this. However, before we all get too cocky it is important to remember that the need for certainty is a basic human trait as is the inability to accept change when it occurs. Two examples spring to mid one personal one public. I had a conversation some years ago with a group of psychiatrists who steadfastly refused to belief that the brain was in any way plastic or capable of change. I imagine their resistance came from two areas. Firstly, their education medicine is a guild it is not a science. Doctors by and large practice what they were told because that’s what the people who taught them learned. As a result evidence based medicine is a constant struggle between those who look at the evidence and those who cling to what they were taught. Secondly, if the brain is plastic then this might render large swathes of psychiatry obsolete. Therefore we have two points of discontent, what they were taught and the possibility that their hip pocket might be affected.
The second example involves the current collection of narrow minded poorly educated politicians we have. It is clear by any metric that the means by which we obtain our energy is changing, coal is a technology that is the 21st century equivalent of the horse and buggy. Yet there is a hard core of politicians who refuse to accept this for whatever reason. If you remove certainty from people and expose to change their natural response in my experience is defensiveness.
Traders are no different, we all seek certainty but trading is a profession of profound uncertainty that needs to be embraced. If their is no uncertainty their is no risk, if their is no risk then there is no potential for profit. If I were to poll the signal most frequent question I get asked it is what is the magic number for various indicators. Intriguingly there is no magic number, there are the numbers and tools I use but yours may be completely different. And if I were to say that the magic number for a tool is 25 does that automatically invalidate the numbers 24 and 26 and if so why?
Trading is an adventure where every day is different and you have to use the skills you have acquired to deal with both the ever changing market and the inevitable swings in your own psyche. So if you dont like uncertainty then you are not suited to trading you would be best served by getting a job that has a rigid timetable such as driving a bus.
