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PhilGoetz comments on New Year's Predictions Thread (2011) - Less Wrong
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As noted by Keynes, markets can remain irrational a lot longer than you and I can remain solvent. However, I'd say about 80% for each of the following:
The price of gold will fall in real terms. [ETA one year on -- Wrong. Fell a bit towards the end of the year, but still a net rise.]
The price of U.S. housing will fall in real terms. [ETA one year on -- numbers still seem to be being crunched, or at least I can't find anything very recent I'd regard as reliable.]
The rate of inflation of U.S. dollars will rise. [ETA one year on -- I think I got this one right. Subject to updating with better data in the near future.]
There will be much more discussion in the general media of a "higher education bubble." Not sure how to measure this.
@JoshuaZ, the number of servicemembers leaving due to DADT repeal will not be measured. The goverment won't ask, and won't tell. [ETA one year on -- I think I got this one right, for what it's worth. As I understand it, the U.S. military is on a path toward shrinking in general anyway.]
And finally -- not necessarily a prediction for this year -- things that can't go on forever won't. 100%
Why do you think the price of US housing will fall in real terms (even not counting inflation)?
Basically, I'm persuaded by the arguments that housing prices are out of line with a historical trend and out of line with incomes and prevailing rents.
Now that you mention it, and upon reflection, I must admit I am biased by some vague, aesthetic sentiments as well. My subjective impression is that the bigger=better approach to housing in America should become less fashionable rather than more. I'd like to think of this as an "intuition," but maybe it's just a "bias." Anyway, we'll get some evidence as the new year goes on.
Are you going to therefore revise your estimate downward?
That's a good question. If this were a disinterested Bayesian search for the truth, then of course. But I take this particular game as a simulated bet, albeit for no monetary stakes. Before I post anything, I have to search inside myself for the most rational course; but once I place my bet, I'm stuck with it. No fair changing it. Reality will determine whether I win or lose, come the end of 2011.
Also, in this real world of ours, I think inarticulable intuitions may have a rational basis, in the same way that a skilled basketball player can make a free throw without knowing what the hell a parabola is. With that said, I should say I don't yet know whether my predisposition was a "bias" or a "brilliant intuition."
On the other hand, this could make for good, low-stress practice at updating estimates based on new evidence/deductions. You probably should keep your original estimate in its place (since that's what people's replies are predicated on), but could you say here what you'd now estimate that probability to be?
Another good question. Upon further reflection, I'd have to admit that my thoughts in this area are....what's the opposite of rigorous? Fuzzy, vague, unconscious? Someone who is very experienced and skilled in an area that requires intangible intuition or a "feel" for something might have very good judgment without being able to articulate the bases for that judgment. But I'm not experienced or skilled in the housing market. For that reason, I think I should be very suspicious of my own subjective intuitions in this area. They are breeding grounds for unknown bias. So I should revise my estimate downward. I must also admit that any pretense of a specific percentage estimate is far more precise than I am able to give. Right now I'm thinking of a range rather than a point, something like sixty to eighty percent.
P.S. Goddammit, I had to think about this some more and must clarify. My confession: I had to revise specifically downward because I think my subjective emotional biases would tend to make me wish that the housing market came down. On a conscious level, I made my first estimate in good faith. But now I am a bit more wary of what I was then thinking.
Fucking rationality. Okay, I've got stuff to do, so I'm going to forget this topic entirely for a bit.