Can I get your number? When and when not to trust complete strangers, or economists

Recently a friend of mine introduced me to her boyfriend. Their story so far is a successful one, even though she gave him the wrong number in the beginning. Over the course of the dinner we came to the conclusion that the wrong number was in fact a catalyst for what made their relationship work — just like the wrong numbers keep the world economy running.

Giving out a number may lead to a successful romantic encounter… or an economic disaster

You meet at a bar, museum, or a party, you talk, you feel the chemistry and the stars all seem aligned until it all comes down to that very moment when one of you have to ask the other for their number. Getting their number is a potentially dangerous gamble which could either result in blissful relief, or an epic failure, or — like in the case of my friend — you could accidently get it wrong.

Economists are frequently, if not all the time, asked to quantify their work — the impact of certain measures, policies or programs. Events such as Brexit and trade wars — viral news topics — are just two examples of quests economists are asked to quantify. These requests can range from understanding the effects of global warming on the use of Northern marine routes, to China’s monetary policy on African exports, or even the probability of having a second child if you are a working woman. It only seems logical that economists should be able to provide a number on how things will work.

But — just as getting a number from a stranger you just met in the bar, even if the sparks flew — it is not guaranteed that this number will work. And, just like the case of my friend, sometimes getting the wrong number may enable a better outcome in the long-term.

Complexity of models progress over time

Before the invention of the phone, to see someone again you had to either set — with a precise time and date — to meet in a place commonly known, or make complex arrangements figuring out where your interest lived. It was almost necessary to get to know some “collateral” information about a stranger to even get a chance to meet again, and neither option would allow for any unforeseen circumstances, disruptions of forces of nature getting in the way

The world has becomemore complex since then. Modern day economists use multifaceted modeling technics, big data or simulation software to provide a single number. The fact that there is a trend of postgraduate economic studies being pursued by people trained originally in physics illustrates the demand for complex technical training in contemporary economics.

One would think that these increasingly complex technics would improve the accuracy of the ability of economists to estimate the effect of various happenings. So the question is then, why with all these advances do economists either provide many — and usually conflicting — numbers or no number at all?

The detail is in the assumptions

When flirting with a stranger goes well, the general expectation is that both sides are single (or not committed, at least). With relationship statuses including options like “It’s complicated”, most of us know, the reality can be very different. The same rules apply to economics: the idea that an economic model can capture the full complexity of the world is unreal, as it leaves out the importance of assumptions.

Assumptions are necessary to make the world measurable — as, for example, we all need to agree to what a “meter” is to be able to tell each other’s height and understand the response. Then, when you say how tall you are, other people can understand this information.

The growth in complexity of models came about due to either more data or more connections between different pieces of data — both of these came with an increase in the number of assumptions, or created more complexity due to complicated relationships. For the majority, this increased the accuracy of the model predictions, but it did not necessary improve the fit to the actuality of the real world.

Therefore, when an economist is giving out a number — an estimate — it is being given on the understanding that the set of peculiarities of the production of the number are accepted, or at least, acknowledged. These peculiarities simplify the world and give the general direction of action when the number does not materialize.

Economic forecasts are not a Bull’s Eye to be hit, but a moving target to enable informed decisions to be made — just like getting a number is not a guarantee of marriage, but just a sign of potential mutual interest..

Wrong numbers can lead to correct decisions

Be it hunter instincts or love at first sight, giving out the wrong number resulted in my friend’s (future) boyfriend becoming more interested. His desire to know more about my friend, eventually, got him the correct number and a successful (so far) romantic relationship.

If everyone possessed the same knowledge in understanding the underlying mechanisms that produces the number, it would eliminate economists as a class of specialists. When flirting, providing your telephone number does not disclose information about the compatibility of your characters and life ambitions, or whether a snoring problem will ruin it.

Investigating the underlying assumptions, and developing theskills to become a more effective communicator– is probably the key recipe for both not staying single, or making sense of our changing economies.

And the rest? It’s complicated.