Missing the trees for the wood

Yes that's right, people often miss the trees for the wood too.

Especially when dealing with complex systems with many parts.

For example, consider technological progress or the stock market. There are so many interacting parts that people seem to not think about the parts. They merely try to predict the emergent outcome as if it were an entity by itself. And they run into estimates that are far off.

My favorite example are economic aggregates like GDP, GNP, Income equality, Wealth distribution, Consumption, Production. I see people fitting increasingly complex auto-regressive models, testing for co-integration, correlation with no regard for the underlying reality.

If a whole economy can be manipulated by a single number like interest rate, I wouldn't be living in it. That economy would be too fragile to prevail.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s