Steven Pinker: prediction

Transcript context

…Do you agree with Robert Aumann’s argument, at least as he makes it in the model, that if you meet an epistemic peer and you each announce your views, you ought to end up agreeing with them even without debating the issue or exchanging information about the facts? The mere fact that you have these two opinions, you should be able to converge. Yes. I guess I do. Of course, it’s dependent on the assumptions that go into the theorem. This is the famous theorem that rational agents cannot agree to disagree. More accurately, rational agents who have the same priors, that is they come to a problem with the same understanding of the situation and hence the same degree of credence in a hypothesis before they even look at any evidence, and they share their posteriors, that is, each one tells the other what their subjective estimate of that idea is, without sharing the evidence that they use to come to that assessment, just what the assessment is, then the theorem says those assessments have to be the same. That is, rational agents with the same priors and whose posteriors or common knowledge cannot agree to disagree. Those assumptions are seldom satisfied, but if they are satisfied, then yes. How does that actually manifest itself in some real-world situation? I don’t know if it was Aumann himself, it may have been, I think, Geanakoplos, who pointed out the corollary of Aumann’s theorem, which sounds totally counterintuitive, even crazy, is that rational agents should not engage in speculative trade. That is, buying a stock in the expectation that you know that its value will rise and you can sell it at a profit. This is exactly what all the investment analysts tell me. Don’t try to time the market, don’t try to outguess other investors, just buy an index fund and be content to share in the overall appreciation of the market. That’s a corollary of Aumann’s agree to disagree theorem based on the similar intuition, namely since prices are common knowledge, at least in a large public market, if you have insider information that changes the assumption. But since prices are common knowledge, any hint that you have that some company is coming out with an insanely great gadget or there’s going to be a pent-up demand for this or that is almost certainly already reflected in the price. You can’t reasonably expect to make a greater profit by speculating on private information. Am I your epistemic peer when it comes to chocolate? I’ve probably eaten a lot more of it than you have. I’ve had it in more countries. I’ve written a book on food. If I tell you chocolate is good and you shouldn’t dislike it, should you disagree with me? Will you, in fact, just agree with me?…

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