You quietly stash a few blunt items away. They’ll be back and in bigger numbers. Who knows why they don’t make their move? They just keep coming, day after day, atop their high walls, gawking. But you have a plan. These precious items will scare them off. You’ve made sure they haven’t seen you storing them. Every item, carefully hidden just out of their sight. You wait… and wait… and wait until the one day you’ve decided, it’s time. You pick up that big rock and hurl it at the closest target. Then another, and another. They run away screaming. You feel an overwhelming sense of self worth. You were right, you’re plan worked! Until you realize, you were wrong because, as it turns out, you’re just an angry chimp.
Darwin tells us that we’ve come far since our ancestral chimpanzees cousins but I think we still have a long way to go. One of the distinguishing features we have over lesser animals is the ability to plan ahead and predict the future. Our brains have evolved to be able to simulate complex scenarios of possible futures to aid us in making decisions today. This probably worked well when we were competing with other Hominids for survival but it doesn’t work so well when trying to deal with complex systems with millions of variables. This is especially true when we talk about systems such as the economy.
Our brains can’t handle all the input that’s available to us, so in the face of these complex systems, we’ve developed models to represent how things work. These are abstractions of the physical world that are easier to understand with the aim of being useful. However with the accumulation of human knowledge, these models have gotten so complicated that a PhD is sometimes a prerequisite for using these model. With all the carefully calculated equations, we come out with a result and proclaim that it must be true if only for the fact that it’s so complicated. Except that it isn’t.
One of the most fundamental parts of using any model is understanding its assumptions and limitations. Despite this fundamental idea, “experts” (perhaps with PhDs) will try to convince you otherwise, saying that they’re models are right without stating the most important parts — the assumptions and limitations. This idea isn’t too complicated, a simple example of a model is saying that if it’s cloudy then it’s going to rain. Of course this isn’t always true, but why then do we believe experts when they say it’s going to rain?
This brings us back to the economy. Everyone from the governor of the Bank of Canada, a famed economic historian and even the guy sitting next to me on the bus has an opinion on where this economy is heading. Each one is using some model of how they think the economy works — some more researched than others. No matter what model they use, no matter how many variables they take into account, they’re still missing a fundamental point that can’t be stressed enough: their model can’t predict the future of something so complicated.
If we could predict the future with any reasonable sense of accuracy, we wouldn’t be in this mess in the first place. Be skeptical of someone who claims they can. If they could predict something even moderately useful with even the slightest sense of accuracy, they’d be rich. It’s no wonder the richest know enough to only use models within their limitations.
Models aren’t useless. They help us simplify the world so that we can wrap our minds around it. We just have to understand their limitations and when they should be used, like the old saying goes “the map is not the territory”. I don’t think we’re as far off from chimpanzees as we’d like to believe but I’m glad we’ve moved beyond throwing rocks and not stepped backward to throwing something less pleasant.