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More fingers required
The Financial Times told us the other day that Moody's mistakenly gave triple-A ratings to billions of dollars worth of debt products because of a bug in their computer models. The error, spotted in January 2007, resulted in some financial instruments receiving credit ratings up to four notches higher than they should have had.
Today we learn that the Office "for" National Statistics (as opposed to "against" National Statistics?) miscalculated the pensions data released in April. Apparently they took some weekly pensions income data but mistakenly treated it as monthly data. Hence, the real figures -- once they become available -- could be up to four times greater than previously revealed.
Is there a lesson here along the lines of the increasing innumeracy of the population? Or is it simply that people aren't thinking about what they're calculating or about whether the "answers" they get bear any resemblance to what common sense ought to tell them is the real outcome?
My favourite film of all time is Fail Safe. (It's Dr Strangelove without the laughs.) There's a great scene where a politics professor advising Strategic Air Command about the reasons for a bomber wing going rogue says that even if complex technology has a propensity to break down, it doesn't matter: there are human overseers to check for IT glitches. But the techy - Gordon Knapp of the defence contractor - explains he's wrong: "I wish you were right. The fact is, the machines work so fast; they're so intricate. The mistakes they make are so subtle that very often a human being just can't know whether the machine is lying or telling the truth."
Seems clear that a combination of over-reliance on technology that makes subtle, unnoticeable mistakes; and desperately complex modelling (which makes it even harder to check for errors in the software) are at fault here.
(I can forgive the NatStats people. They're just civil servants on a modest wage. But remind me again why City folk get paid so much? Their screw-ups are so much more costly...)
Posted by :Richard Young | May 23, 2008 10:58 AM