Monday, November 3, 2008

THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS

Edge has an essay by Nassim Nicholas Taleb, author of The Black Swan.
---THE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS ---

Statistical and applied probabilistic knowledge is the core of knowledge; statistics is what tells you if something is true, false, or merely anecdotal; it is the "logic of science"; it is the instrument of risk-taking; it is the applied tools of epistemology; you can't be a modern intellectual and not think probabilistically—but... let's not be suckers. The problem is much more complicated than it seems to the casual, mechanistic user who picked it up in graduate school. Statistics can fool you. In fact it is fooling your government right now. It can even bankrupt the system (let's face it: use of probabilistic methods for the estimation of risks did just blow up the banking system).
Indeed! Woe unto those who assume all events are independent, and distribution well known. Click through to Edge for more. There is a technical appendix too.