Ok, I understand this - that soccer has many variables and it is difficult to create a model with all of these variables. But my point is, the global economy has way more variables than soccer. Way way way way more variables. At least 7.5 billion of them.
So would you argue that creating a statistical model of soccer is harder than creating one for global economies? I think it's harder to model economies.
I'm not even trying to give Goldman a hard time! I'm saying that Goldman probably put together a very accurate model of "soccer", but we aren't watching an accurate model of soccer; we're watching the corrupted one where the players and skills don't matter.
I think we have to be very clear on what economic "models" Goldman uses.
If you're talking about GDP growth forecasting, or forecasting unemployment numbers, these are ultimately questions of aggregation. Yes, there are 7.5 billion people, but at the end of the day each individual agent's actions don't make a tremendous difference for an aggregate measure like GDP. During periods of low volatility, as we are currently experiencing, it's really not all that impressive to forecast the unemployment rate +/- 0.25%, or GDP growth within 0.5%.
If you're taking about their market-making and trading businesses, they've had some horrendous quarters recently as well (http://www.businessinsider.com/goldman-sachs-just-had-a-hist...). A very small portion of Goldman's business is taking an opinionated stance, most of their income comes through relatively low-risk market making activities.
And let's not forget that during the 2008 financial crisis, certain departments within the company correctly wagered against credit default swaps, while others had exposure to subprime mortgages. The company still needed an injection of capital from Warren Buffett and the US Treasury to weather the crisis. Point being, they aren't clairvoyant oracles.
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Regarding your last point, which was also made in your original comment, you seem to be claiming some form of what economists call "omitted variable bias", and seem to be hypothesizing that the "omitted variable" is corruption or cheating.
From the purely technical standpoint of building models, the tiny samples (https://www.theringer.com/soccer/2018/7/11/17557720/world-cu...) and the nature of the "data" being collected means that there are plenty of other explanations, like incorrectly estimated parameters or measurement error.
If you're trying to suggest that there is corruption or cheating in soccer, please point to a concrete example of a team in a critical game receiving a disproportionate number of calls. Unsure if you're aware, but this was the first World Cup with instant video replays for the referees to use. Had this replay been in use more widely in international soccer, the US might've qualified for this World Cup (https://deadspin.com/u-s-a-out-of-world-cup-on-phantom-goal-...), England might've won/tied that pivotal 2010 World Cup game (https://en.wikipedia.org/wiki/Ghost_goal#England_v_Germany_a...), etc.
Soccer may have had a sordid past with the picking of host countries, but the trends in the actual game itself point to technology reducing the ability of referees to make blatantly terrible calls.
Thanks for the replies and the detailed sources, it's interesting to read!
> Point being, they aren't clairvoyant oracles.
Yeah, my argument was weak in that regard. They aren't anywhere close to perfect or accurate, I'll admit.
> you seem to be claiming some form of what economists call "omitted variable bias"
Yes! Is that what it's called?
> please point to a concrete example of a team in a critical game receiving a disproportionate number of calls
Corruption doesn't have to be that explicit. Maybe key players or coaches are paid to perform poorly? It doesn't always come down to the ref. But I admit I have no examples.
So would you argue that creating a statistical model of soccer is harder than creating one for global economies? I think it's harder to model economies.
I'm not even trying to give Goldman a hard time! I'm saying that Goldman probably put together a very accurate model of "soccer", but we aren't watching an accurate model of soccer; we're watching the corrupted one where the players and skills don't matter.