Sunday, September 21, 2014

The Future is not a consequence-free zone for Modelling Consultants

Will Abbott be a one-term PM, will the Coalition gain a second term under a new leader? The satisfaction polls have never looked good for Abbott and on-line betting odds aren't too flash, either.

If Labor is elected in 2016 or 2019, will they follow the Coalition and initiate a round of Royal Commissions? Game Theory, especially "the iterated Prisoner's Dilemma", suggests that "Tit for Tat" is close to an optimum strategy for a co-operation/trust game like Politics. It should be odds-on that Bill Shorten will initiate an NBN Royal Commission in his first 90 days, it's "just good business" for them.

Will the various Ministers, especially Turnbull, face especial treatment, as misleading the Parliament is taken seriously by them? Almost certainly.

But what about the various consultants, like Communications Chambers (UK) and Henry Ergas? Would an NBN Royal Commission find them guilty of any criminal offences?

I hope the authors were paid enough to retire on. The way they've proudly trumpeted their ignorance and complete lack of understanding of their topic will ensure that no commercial entities will ever hire their services. In much the same way that Henry Ergas' Concept Economics was forced into liquidation in 2009.

For pundits, futurists, writers and other prognosticators, like Economists, the Future is usually a very, very safe place, especially the farther away it is. Like a 25-year economic forecast.

Only the NBN Cost Benefit Analysis can be tested with real-world data on FTTP vs FTTN/Mixed-Technology in 3-5 years. That's not "it will give us an idea", it will be better than a 99.9% Confidence Interval.

The trouble for the likes of Turnbull and Ergas is that in 3 years there will be more than enough long-run evidence, in the form on NBN Co subscriber data, to absolutely test all the propositions embedded in the Ergas models and the quite idiotic "Bandwidth Forecast".

So, when the NBN Royal Commission kicks off, it'll only take a month to get the comparison figures out of NBN Co.

Where will Ergas stand when his absurd propositions are exposed? My guess is he'll argue what was attributed to an old French saying "we know it works in practice, but does it work in theory?"
Variations from University of Chicago and a random Blog with Graduation Advice. 

That will work well to limit cognitive dissonance for Mr Ergas, right up until the moment he's served with a writ. Perhaps it will be the new Federal Government requesting their $10 million back, with interest.